Purchase of new machine for the production of latex

Assignment Help Financial Management
Reference no: EM131982590

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.95 million and will last for six years. Variable costs are 34% of sales, and fixed costs are $2081409 per year. Machine B costs $5.11 million and will last for nine years. Variable costs for this machine are 21% of sales and fixed costs are $1312089 per year. The sales for each machine will be $9.8 million per year. The required return is 11 %, and the tax rate is 38%. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis. Calculate the EAC for machine A. (Round answer to 2 decimal places. Do not round intermediate calculations)

Reference no: EM131982590

Questions Cloud

What is its yield to maturity : The bond sells for $1,020.50. (Assume that the bond has just been issued.). What is it’s yield to maturity?
Oregon lumber is considering the purchase of paper company : Oregon Lumber is considering the purchase of a paper company. Purchasing the company would require an initial investment of $300 million.
Calculate the coefficient of variation of the risk return : Calculate the coefficient of variation of the risk return relationship during each decade. average return for bonds
How much will annuity be : He will take the proceeds and provide himself with a 18-year annuity. Assuming a 13 percent interest rate, how much will this annuity be?
Purchase of new machine for the production of latex : Renegade Industries is considering the purchase of a new machine for the production of latex. Calculate the EAC for machine A.
Assumed to come at the end of each payment period : Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity).
Standard deviation of the portfolio return : what would be the expected risk on Mr. Jones’ portfolio (standard deviation of the portfolio return)?
What should the stock price be worth after three years : What should the stock price be worth after three years?
Which payments come at the beginning of each period : What is the present value of a 9-year annuity of $5,500 per period in which payments come at the beginning of each period?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the target cash balance and upper limit of cash

Touchdown Co. has a lower limit of cash of $1,000 set by management. What is the target cash balance? What is the upper limit of cash?

  Expected return on equity of otherwise identical equity firm

Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt–equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $3.3 million worth of debt outsta..

  What is required rate of return on a stock with beta

Assume that the risk-free rate is 6.5% and the required return on the market is 10%. What is the required rate of return on a stock with a beta of 1.4?

  Portfolio returns within half a percentage point of index

Bond investers often like to buy shares in mutual funds that give returns that closely follow commonly quoted indices, such as the Lehman Brothers Government Index. One popular index is computed from several thousand different bond types. Roughly how..

  Preparing strategy for the fall season

Allison’s Dresswear Manufacturers is preparing a strategy for the fall season.

  What is sorenson expected stock price in seven years

What is Sorenson's expected stock price in 7 years, i.e., what is P7?

  Make the company less likely to proceed with the investment

Weisbach Electronics is considering investing in India. Which of the following factors would make the company less likely to proceed with the investment?

  Calculate the value of your bond relative

Calculate the value of your bond relative to this interest rate using equation 11.2 in the text. Assume that i = 5%. Is your bond selling for a premium or at a discount based on your calculation?

  Using a money-market fund and a checking account

Martin Company uses Miller-Orr model to manage its cash, using a money-market fund and a checking account. Martin keeps a minimum balance of $5000 in the checking account. The checking account pays no interest, but the money market pays 5% interest p..

  Tax losses and gains in capital budgeting

Compute the tax loss on the sale and the related tax benefit if the asset is sold now for $20,560.

  What is your annualized holding period return

You purchased 300 shares of General Electric stock at a price of $63.40 four years ago. You sold all stocks today for $70.56. During that period the stock paid dividends of $3.60 per share. What is your annualized holding period return (annual percen..

  Calculate book value of an asset

The asset is sold at the end of six years for $3,785. Calculate book value of an asset.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd