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After the long drought of 1992, the manager of Long Branch Farm is considering the installation of an irrigation system. The system has an invoice price of $100,000 and will cost an additional $15,000 to install. It is estimated that it will increase revenues by $20,000 annually, although operating expenses other than depreciation will also increase by $5,000. The system will be depreciated straight-line over its depreciable life (5 years) to a zero salvage value. The system can actually be sold for an estimated $25,000 at the end of 5 years. If the tax rate on ordinary income is 40 percent and the firm’s required rate of return is 16 percent, should the firm purchase the system? Why? Show your work.
Describe briefly the two main benefits normally available under an endowment policy
Assume that next year the firm again has net income of $30,000 pays a $10,000 dividend to shareholders, Common Equity will be:
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $24,500 to buy 570 units from Carry-ALL.
The current T-bill rate is 3%. The market return is 9%. The company has a beta of 2. What is the cost of common equity?
The hospital expects to have a patient load of 1390 inpatient days next year. What is the change in profit if the hospital accepts the proposal?
How many payments of 15,500 dollars can Mel expect to receive in retirement if his first annual retirement payment of 15,500 dollars is received in 6 years?
Are their opportunities to pursue in order to grow the company? Can the company grow organically?
Interpret whatever data are provided for earnings-at-risk and MVE at risk. Some instances EVE sensitivity is labeled as value-at-risk for bank equity.
A corporation had net taxable income of $60,000 in 1991.- How much income tax must the corporation pay?- What is the marginal tax rate?- What is the average tax rate?
What must be the coupon rate on these bonds?
Next Week’s Technology (NWT) is evaluating whether to change its credit terms from 2/10, net 30 to 3/10, net 30. Should NWT change its credit terms?
Heymann Company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market price of $834?
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