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You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,000 to purchase and has a three-year life. Machine B costs $17,000 to purchase but has a four-year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Which machine should you choose? Assume a marginal tax rate of 35 percent and a discount rate of 12 percent. (Round answers to 2 decimal places, e.g. 15.25.)
Equivalent Annual Cost (EAC) of machine A________________
Equivalent Annual Cost (EAC) of machine B_________________
A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance.
A bank issues a standard 30-year fixed rate mortgage at 7.8% for $150,000. Thirty-six months later, mortgage rates jump to 13%. If the bank sells the mortgage, how much of a loss is incurred?
What about businesses - do they have a role in ensuring the law is fulfilling its purpose?
What are hollow corporations?
Calculate the market capitalisation of Blackmores. Do you think Blackmores' stock is under- priced or over-priced? Answer this question with reference to capital asset pricing model (CAPM), and justify your answer
Identifying those patterns and trading against them, the [fund] managers say, allows them to enhance performance." Is the strategy these fund managers are using consistent with the efficient markets hypothesis?
The project has a 12 percent cost of capital. Assume at the outset that the company does not have the option to delay the project. Use decision tree analysis to answer the following questions. What is the project's expected NPV if the tax is imposed?
you are planning to invest 2500 today for three years at a nominal interest rate of 9 with annual compounding. what
Why do corporations often sell convertibles on a rights basis?
Mozart Inc.'s $98,000 taxable income for 2014 will be taxed at the 40% corporate tax rate. For tax purposes, its depreciation expense exceeded the depreciation.
Firms often involve themselves in projects that do not result directly in profits. For example, IBM and ExxonMobil frequently support public television broadcasts. Do these projects contradict the goal of maximization of shareholder wealth?
The Withit Corporation is considering two alternatives for automating their machine-parts operation. Alternative 1 requires an initial investment of $70,000 and decreasing yearly O&M costs as shown in the table below. It has a five-year life span.
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