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Consider the following two options related to one of the old but special machine tools in your machine shop. -Option 1: You continue to use the old machine tool that was bought four years ago for $11,000. It has been fully depreciated but can be sold for $2,200. If kept, it could be used for 5 more years with proper maintenance and with some extra care. No salvage value is expected at the end of 5 years. The maintenance costs would run $13,000 per year for the old machine tool. -Option 2: You purchase a brand-new machine tool at a price of $16,000 to replace the present equipment, it also has an expected economic life of 5 years and will have a salvage value of $2,000 at the end of that time. With the new machine tool, the expected operating and maintenance costs (with the scrap savings) amount to $4,000 each year for 5 years. What is the DIFFERENCE IN PRESENT WORTH between the two alternatives at an interest rate of 14%? Enter your answer as a positive number.
Explain liquidity risk and relate it specifically to venture capital. Do you believe that liquidity risk is more important or crucial in venture capital than in other types of investment? Explain.
Your firm is contemplating purchase of new $800,000 computer-based production system. The system will be depreciated straight-line to zero over its 4-year life.
Sealord Fisheries issues zero coupon bonds on the market at a price of $179.14 per bond. Each bond has a face value of $1,000 payable at maturity in 20 years. The bonds are callable in 8 years at a call price of $500. Using semiannual compounding, wh..
You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $704, $707, $711, and $672. If the account pays 6.40 percent ann..
Woidtke Manufacturing's stock currently sells for $32 a share. The stock just paid a dividend of $2.25 a share (i.e., D0 = $2.25), and the dividend is expected to grow forever at a constant rate of 4% a year. What stock price is expected 1 year from ..
For a firm without default, are the tax savings from debt a risky asset? - For a firm without default, are the tax obligations from debt a risky asset?
If you can earn 12% per year, how much do you need to deposit on a monthly basis if the first payment is made in one month?
Financial leverage effects Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt.
First City Bank pays 6 percent simple interest on its savings account balances, whereas Second City Bank pays 6 percent interest compounded annually.
The national debt of Canada is best defined? as. What is the basic activity of? banks?
If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days, what should happen to this bank's net interest margin?
Hugo Boss AG is a German luxury fashion and style house that is examining its financing policy for possible changes. The firm has 8-year coupon bonds outstanding with a face value of $ 400 million and interest expenses of $18.0 million a year. Estima..
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