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The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net operating working capital. The company's cost of capital is 6%. The proposed asset costs $400,000, will require $20,000 to modify for operations, and falls in the 3-year class MACRS for depreciation rates: .33, .45, .15, and .07 for years 1 through 4, respectively. At the end of the 4 years, it is expected that the asset may sell for $30,000. The company's tax rate is 21%. a) What is the initial outlay for this project? b) What are the operating cash flows in Years 1 through 4? c) As part of the terminal cash flow in Year 4, what is the after-tax salvage value of the asset? d) What is the net present value of this proposed asset investment? Should it be accepted or rejected?
James purchased liability insurance with a $100,000 limit from Insurer A. If this loss is settled on a pro rata basis, how much must each insurer pay?
Central Systems, Inc. desires a weighted average cost of capital of 9 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted aver..
If produced by Method A, a product’s initial capital cost will be $100,000, Based on present worth analysis at a 15% interest rate, which method should be used?
Determine the price of the stock that is currently paying a $1 dividend and has a discount rate of 17% by using:
The discount rate is 10.3 percent. What is the benefit of the remodeling project to Top Shelf Industries?
Explain how the composition of a community bank’s investment portfolio might differ from the composition of a large bank’s portfolio.
A fully amortized bond has a maturity of 5 years, The principal repayment the first year is:
John Jones currently holds tax-exempt bonds that pay 7% interest and is in the 32% tax bracket. He is considering buying taxable bonds. With all else the same, what interest rate on the taxable bonds will he need to get the same after-tax return as t..
The bond is currently selling for $908.31 and has a 2 year maturity. What is the bond's yield to maturity (YTM)?
find the firm's debt ratio (i.e., total liabilities / total assets): ROE (N/E) = 0.35 (expressed as a decimal) Debt ratio (S/A) = 4.5
What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration? Use duration to estimate the new price of the bond. Compare your answer to the new bond price calcul..
how much do the contest sponsors have to deposit in the escrow account?
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