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A 50-kilowatt gas turbine has an investment cost of $37,000. It costs another $16,000 for shipping, insurance, site preparation, fuel lines, and fuel storage tanks. The operation and maintenance expense for this turbine is $350 per year. Additionally, the hourly fuel expense for running the turbine is $7.25 per hour, and the turbine is expected to operate 2, 900 hours each year. The cost of dismantling and disposing of the turbine at the end of its 6-year life is $9,000. If the MARR is 13% per year, what is the annual equivalent life-cycle cost of the gas turbine? What percent of annual life-cycle cost is related to fuel?
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year.
Currently the risk-free rate is 6% and the expected return on the market portfolio is 11%, the expected return for 3 stocks as priced in the market are listed below with their estimate of beta.
If you are looking for a 4% real return (inflation-free interest) on your investment, would you be interested in an investment opportunity that produces a 10% return on investment (market interest rate) if the inflation rate is 6%? it says that the a..
What are the yields to maturity and duration of the two bonds?
Calculating returns: You bought a stock three months ago for $24.87 per share. What is the effective annual rate (EAR)?
You have the following information about Burgundy Basins, a sink manufacturing company. Burgundy is contemplating what for the company is an average risk investment costing $40 million and promising an annual ATCF of $6.4 million in perpetuity. What ..
A debt of $12,000 is to be amortized by equal payments at the end of each month for 5 years. Interest is charged at 24% compounded monthly. Construct a partial amortization schedule to show the outstanding principal after the second payment.
The cash flow in year 0 represents the initial equity investment. What problems would you encounter in computing the equity investor's rate of return on this investment?
Tim's portfolio contains two stocks, Light co and Shine co. Last year his portfolio returned 14 percent. Lightco's return was 5 percent and Shine co returned 20 percent.
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.9, 1.1, 1.3, and 1.5, respectively. Assume all current and future proje..
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent, and the company just paid a di..
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star would need seven SALs, and each SAL costs $3,150 and requires $360 of maintenance each year. Assume that the ..
Consider a three-period (four-date) binomial model that has the following characteristics: • Current price for underlying stock S = $40, Exercise price X = $40 • In each period, the stock price goes up by 6% or down by 2% from what it was in the prev..
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