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Mars INC is considering the purchase of a new machine which will reduce manufacturing costs by 5000 annually. Mars will use MACRS accelerated method to depreciate the machine, and its expects to sell the machine at the end of its 5-year operating life 10000. The firm expects to be able to reduce net working capital by 15,000 dollars when the machine is installed but required working capital will return to the original level when the machine is sold after 5 years. Mars marginal tax rate is 4 percent, and its uses a 12 percent required rate of return to evaluate projects of this nature. If the machine costs 60,000 dollars, what is the NPV of the project.
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assume that you have been asked to place a value on the fund capital equity of besthealth a not-for-profit hmo. its
Edwards Construction currently has debt outstanding with a market value of $90,000 and a cost of 11 percent. The company has EBIT of $9,900 that is expected to continue in perpetuity. Assume there are no taxes. What is the value of the company's equi..
You are trying to estimate the cost of capital for Miami Corp and had collected the following information: Ø The firm has debt with a book value of 20 million, trading at 120% of par bond. Estimate the market value of the debt. Estimate the market va..
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Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. Wh..
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The expected return for the general market is 13.0% and the risk premium in the market is 8.9%. Tasaco, LMB, and Exxos have betas of 0.849, 0.681, and 0.581 respectively. What are the appropriate expected rates of return for the three securities?
Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 in annual pretax cost savings. The press also requires an initial investment in s..
You require a new machine for 20 years. Machine A lasts 5 years and Machine B lasts 4 years. Machine A costs $13,000 and Machine B costs $11,000. The salvage value of Machine A is $3,000 and the salvage value of Machine B is $4,000. Annual O&M costs ..
An investor was expecting a 18% return on his portfolio with beta of 1.25 before the market risk premium decreased from 8% to 6%. Based on this change, what return will now be expected on the portfolio?
An investment offers a 15.5 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 6.5 percent. What does Bill believe the inflation rate will be over the next year?
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