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Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise, because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins' cost of capital is 14 percent. Should the firm replace its old knitting machine, and, if so, which new machine should it use?
A used machine costs$100,000 annually to run. What is the maximum that should be paid to replace the machine with one that will last 3 years and cost only $4,000 annually to run? The opportunity cost of capital is 12%
How great a problem is the current account deficit in the United States? Synthesize the opinions of professionals in the finance industry.
What must the coupon rate be on Merton's bonds? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16). )
Piano Tuners Unlimited is planning a promotional campaign at cost $6,000,000. The resultant after tax cash flows would be $500,000 each year in the absence of debt, and appropriate discount rate for an unlevered PTU would be 7.5 percent.
Calculate the monthly payment required if Bill agrees to the sticker price of $25,000 and finances the car at 2% per year and prepare the amortization schedule for the loan using an Excel spreadsheet.
What expected rate of return would a security earn if it had a 0.6 correlation with the market portfolio and a standard deviation of 3 percent?
ameritech corporation paid dividends per share of 3.56 in 1992 and dividends are expected to grow 5.5 a year
If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk premium for the thirty-year bond over the ten-year bond.
Define each of the following terms: a. Annual report; balance sheet; income statement b. Common stockholders' equity, or net worth; retained earnings c. Statement of retained earnings; statement of cash flows d. Depreciation; amortization; EBITDA e. ..
You're the controller of a firm whose CEO believes which debt must always be employed to finance long-term expenditures because interest is tax deductible and debt does not dilute ownership.
Janson Bottle Corporation sold $400,000 in long-term bonds for $351,040. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10 percent.
The face value is $1,000 and the market price is $1,020. Which one of these terms correctly describes a feature of this debt?
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