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You must evaluate a proposal to buy a new milling machine. The base price is $135,000 and shipping and installation costs would add another $8,000. The machine falls into the MACRS 3-year class and it would be sold after 3 years for $94,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $5,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $52,000 per year. The marginal ta rate is 35% and the WACC is 8%.
a) What is the depreciation expense for Year 2?
b) What is the cash flow in Year 2?
c) What is the terminal cash flow at time t=3, given that the book value in year 4 is $10,010
d) What is the projects NPV?
What is the accumulated value of her RRSP account on August 1, 2005, if interest is 10.44% compounded quarterly?
An investor is thinking of investing in a recurring deposit scheme that offers an interest rate of 12% per annum
Zee Corporation recently issued 20-year bonds. The bonds have a coupon rate of 8 percent and pay interest semiannually. Also, the bonds are callable in 6 years.
You and two business partners are considering the purchase of the following commercial investment property:
Question 1: What are the differential operating cash flow savings per year during years 1 through 5 for the new fleet? Question 2: What is the initial cash outlay required to replace the existing fleet with the newer tractors?
The required return on debt (before taxes) is 7.5%, the required return on equity is 15%, and the cost of capital is 10%. What are the proportions of debt and equity financing?
Describe and analyze the risk management role of options, futures and forward contracts.
Use prospectus theory in your argumentation and adopt standard prospectus theory references. Repeat gain, segregate events or integrate events
balance sheet reflects market values of the target proportions
The stock price of Baskett Co. is $53.40. Investors require a return of 12 percent on similar stocks.
From July 2 through the end of the year it used 400 doses. What is the inventory value at the end of the year assuming FIFO? What is the value assuming LIFO?
What is the intrinsic value of equity share of XY limited ?.Take a 7 year time frame for your calculation.
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