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You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $200,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $50,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $11,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $49,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.
Year 1:
Year 2:
Year 3:
Identify the nature of the bank’s interest rate risk, the agreement rate, and whether the bank is the buyer or the seller of the Forward Rate Agreement.
Calculate the price of a call and a put option with exercise price $10 and two periods on a stock whose intial price is $13.
Falcon Ridge Developers wants to compute the firm’s WACC for capital budgeting purposes. The firm uses 30% debt, 10% preferred stock and the remainder is in equity. The YTM on the firm’s debt is currently 4.5% and the firm’s marginal tax rate is 40%.
Explain and discuss the use of leverage to produce more than normal results. Define and calculate the component costs of debt and preferred
The required rate of return demanded by the firm is 15%. Determine the systems NPV. Should the firm accept this project?
Stuart wishes to have $14,000 to buy a used car three years from now. He plans to accomplish this, through an account with a nominal interest rate of 3% compounded monthly, by depositing $300 at the end of each month during the first year, and Q at t..
Calculate: Payout Rate, Reinvestment rate, Diviends($) and stock value.
An investor purchases a mutual fund for $80. What is the net rate of return from this investment?
Zerox Corporation, a manufacturer of office equipment, is headquartered in Connecticut. Zerox stock (ZRX) is traded on all major exchanges.
A manual (wand) car wash has 10 bays. On a Saturday morning, customers arrive at an average rate of 24/hour (assume Poisson arrivals), and each spends an average of 18 minutes washing their car (assume negative exponential distribution). Assuming tha..
The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,050. What is the bond's nominal yield to call?
Consider a S corporation. The corporation earns $3.5 per share before taxes. The corporate tax rate is 35%, the tax rate on dividend income is 15%, and the personal income tax rate is set at 39.6%. What are the shareholder's earnings from the corpora..
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