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The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm’s R&D department. The equipment's basic price is $100,000, and it would cost another $15,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $25,000. The MACRS rates for the first 3 years are 0.3333, 0.4445 and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $6,000. The machine would have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%.
A. What is the Year 0 net cash flow? If the answer is negative, use minus sign.
B. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.
C. What is the additional (nonoperating) cash flow in Year 3? Do not round intermediate calculations. Round your answer to the nearest dollar.
Identify any consumer product or service that you'd like, and explain who the target market is (or should be) for it. What are the key market segmentation variables (age, gender, educational level, geographic location, etc.) in defining the target ma..
Prepare the first row of a loan amortization schedule based on the following information. What portion of this payment is Interest?
Riverview Company is evaluating the proposed acquisition of a new production machine.
Murphy Toys Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Prepare a worksheet to estimate the value of the Malaysian target based on the information..
The cost of capital is 5.84 percent and the interest rate on the loan would be 4.12 percent. What is the net present value of the project?
What is the biggest gap between theory and applications when estimating WACC? And in your opinion, what are the key reasons to form such a big gap?
What are the prices of a call option and a put option with the following characteristics?
Which of the following descriptions of net operating income (NOI) is correct?
You find the following order book on a particular stock. The last trade on the stock was at $70.54.
If a firm has low fixed costs relative to all other firms in the same industry, a large change in sales volume (either up or down) should have:
Which of the following is true concerning commercial paper?
Assume the opportunity cost of capital is 10%. Create two normal projects (i.e., sets of cash flows beginning at time zero with a negative cash flow and continuing with subsequent positive cash flows) that are both positive NPV. Create the projects s..
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