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Firm XYZ is the leading snow producer in the USA. The company hired a consultant to perform a study that cost $10,000. The new equipment costs $900,000 and will require shipping costs of $25,000. Firm XYZ has estimated that the additional snow production will decrease environmental costs by $250,000 per year. The equipment belongs to a CCA class of 25%. It is estimated to have a useful life of 9 years after which it can be salvaged for $120,000. If the new equipment is purchased, the company will require an increase of $15,000 in inventory. Also, accounts payable will have to increase by $4,000. All working capital elements will be recovered fully at the end of the useful life. The company has to borrow an additional $80,000 at 10% interest rate from the bank. Assuming the company has a cost of capital of 12% and a tax rate of 40%.
a) Based on the NPV analysis, should Firm XYZ purchase this new equipment? Show your work
b) What can you say about the IRR of the project?
Verybest Hospital is a sub-acute facility outside of Santa Rosa, New Mexico. The hospital operates an emergency room and has 75 beds that are generally at full capacity.
Your portfolio has a beta of 1.48. The portfolio consists of 15 percent U.S. Treasury bills, 32 percent stock A, and 53 percent stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of stock B?
RACE mutual fund is a no-load fund that had a net asset value one year ago of 25.60 . Today the NAV is 28.83 . during the year dividends of .72 were paid out and a capital gains distribution of .65 was made . Calculate the approximate yield for RA..
Norville Creations wants to get an after-tax profit of $45,000 for the year ended December 31, Year 1. The corporation sells its product for $35 per unit and has a contribution margin ratio of 15 percent.
Journalizing dividend and treasury stock transactions, and preparing stockholders' equity Prepare the stockholders' equity section of Lennox Health Foods' balance sheet at December 31, 2012.
The price of the stock subsequently fell to $38 before rising to $49 at which time Graham covered the position that is closed the short position. What was the percentage gain or loss on the investment. Please explain.
The costs of maintaining current assets, including the opportunity cost of capital is known as, Expenses should be recorded in the period in which they are used up.
Discuss the components of microeconomics OR macroeconomics, explaining why they are important to financial planners.
Analyze the history and evolution of Internet and the World Wide Web. Reflect on where these technologies started. Identify and explain the roles of ARPANET, NSF, and IETF. Then, describe the evolution of the WWW.
Of the six key methods used to evaluate capital projects, which one do you prefer?
The rate is prime plus 2 percent. The prime rate was 8.5 percent at the beginning of the loan and changed to 9 percent after two months. This was the only change. How much interest must XYZ corporation pay?
Describe Evaluate the purchase option for a firm is considering a new milling machine from among three alternatives
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