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"A firm is considering purchasing a computer system. -Cost of system is $167,000. The firm will pay for the computer system in year 0. -Project life: 5 years -Salvage value in year 0 (constant) dollars: $24,000 -Depreciation method: five-years MACRS -Marginal income-tax rate = 37% (remains constant over time) -Annual revenue = $140,000 (year-0 constant dollars) -Annual expenses (not including depreciation) = $83,000 (year-0 constant dollars) -The general inflation rate is 4.1% during the project period (which will affect all revenues, expenses, and the salvage value but not depreciation). -The firm borrows the entire $167,000 at 12.5% interest to be repaid in 2 annual payments. The debt interest paid and the principal payment SHOULD NOT be changed by the inflation rate. Lending agencies set the interest rate of borrowing to account for the inflation rate. Calculate the effects of borrowing and include the debt interest paid and the principal repayment into the income statement and cash flow statement. Determine the INFLATION-FREE IRR' of the computer system. Enter your answer as a percentage between 0 and 100."
The first payment is $60 and is to be paid one month from the date of the loan. Each succeeding monthly payment will be 1% larger than the prior payment.
Explain whether Paul will or will not be required to obtain a mortgage loan originator license.
Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..
Occasionally, Insurer X will reinsure part of Insurer Y’s risks, and Insurer Y will reinsure part of Insurer X’s risks.
Accounting is often described as "The Language of Business." Do you speak the language? Specify what you believe are the three most important financial ratios that might help you assess the strength of a firm. These ratios are listed towards the end ..
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semi annual interest payments. Bond A has a coupon rate..
When the dollar is worth more in relation to currencies of other countries, are you more likely to buy American made or foreign made jeans? Are US companies that manufacture jeans happier when the dollar is strong or when it is weak? What about an Am..
Why is it important that marketers understand consumer’s behavior rather than consumer behavior? What are 2 ways companies make purchase decisions versus the way individuals make purchase decisions?
An investor has put money in four stocks in the dollar amounts indicated and with betas specified. What is the portfolio beta?
A stock index is currently 1,500. Its volatility is 18%. The risk-free rate is 4% per annum (continuously compounded) for all maturities and the dividend yield on the index is 2.5%. Calculate values for u, d, and p when a 6-month time step is used. W..
Assume you have a two-stock portfolio. How does the correlation coefficient, ρ, between the two stocks’ returns impact the standard deviation of this portfolio? Explain your answer. (Hint: The two variables under discussion are ρ and σP.)
What will be the new portfolio beta if you keep 91 percent of your money in the old portfolio and 9 percent in a stock with a beta of 0.94?
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