What is the effective or net cost of the large press

Assignment Help Financial Management
Reference no: EM132061365

Zarin Printing Company is considering the acquisition of Freiman Press at a cash price of $55,000. Freiman Press has liabilities of $94,000. Freiman has a large press that Zarin needs; the remaining assets would be sold to net $64,000. As a result of acquiring the press, Zarin would experience an increase in the cash inflow of $28,000per year over the next 11 years. The firm has a 14 % cost of capital.

a. What is the effective or net cost of the large press?

b. If this is the only way Zarin can obtain the large press, should the firm go ahead with the merger?

c. If the firm could purchase a press that would provide slightly better quality and $33,000 annual cash inflow for 11 years for a price of $110,000, which alternative would you recommend?

Reference no: EM132061365

Questions Cloud

A capital or capitalized lease is also known : A capital or capitalized lease is also known as ________.
Main deliverable of your redesign project : efine the scope of a project to redesign your factory name at least 10 main deliverable of your redesign project.
Which indexes will re-balancing occur most frequently : Which indexes will re-balancing occur most frequently? What are the main differences between a sensitivity analysis and a Monte Carlo analysis?
Will this cause the optimum time to start the project : Will this cause the optimum time to start the project to be delayed or to be started earlier? Explain why.
What is the effective or net cost of the large press : What is the effective or net cost of the large press? If this is the only way Zarin can obtain the large press, should the firm go ahead with the merger?
Calculate the total cost of purchasing : Calculate the total cost of leasing. Calculate the total cost of purchasing.
Disadvantage of leasing from lessee perspective : Which of the following is a disadvantage of leasing from a lessee's perspective?
Element should be present to qualify as capital lease : Under FASB Standard No. 13, which of the following element should be present to qualify as a capital lease?
Deduction for income tax expense : The Country Road Limited income statement shows a deduction (in brackets) for income tax expense.

Reviews

Write a Review

Financial Management Questions & Answers

  What is new aftertax cost of debt

Terrier Company is in a 40 percent tax bracket and has a bond outstanding that yields 10 percent to maturity. b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 25 percent. Wha..

  What is the systemic risk for this stock

If we have Stock A with required rate of return each to 15%, risk free rate of reture is 3%, the expected return for the market portfolio is 7%. what is the systemic risk for this stock. does this stock have higher or lower risk than the market. what..

  Government bonds-corporate bonds and municipal bonds

Please sort the level of risk, liquidity and return of that bond on the list: Government Bonds, Corporate Bonds, Municipal Bonds, Foreign Bonds and Financial bonds.

  Starting to save money-expected to earn an annual return

Bob is 20 years old today and is starting to save money, so that he can get his MBA. He is interested in a 1-year MBA program. Tuition and expenses are currently $20,000 per year, and they are expected to increase by 5% per year. Bob plans to begin h..

  Name any four reasons why a bond would decrease in value

Name any 4 reasons why a bond would decrease in Value? Do a comparison between common stock and prefrred stock?

  Investor holdings both before and after the dividend

Cyberco Corporation has 5 million shares of stock outstanding. Cyberco's after-tax profits are $15 million and the corporation's stock is selling at a price-earnings multiple of 10, for a stock price of $30 per share. Use the price earnings multiple ..

  What will be your total 2-year real and nominal returns

What will be your total nominal return over the two years if inflation is 3% in the first year and 5% in the second?

  Identify options for implementing your capital proposal

Your boss has strongly recommended that you identify options for implementing your capital proposal.

  What was the dividend yield

A fund has $177 million dollars of assets, $38 million of liabilities, and 21 million shares outstanding. During the year the fund made dividend distributions of $1.3 per share. What was the dividend yield?

  What rate of interest are you charging your friend

You tell him that in five years he will have to pay you $700. What rate of interest are you charging your friend?

  Discuss the two-sided nature of default risk in the case

Consider a European call option on a non-dividend-paying stock where the stock price is $52, the strike price $50, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is one year. If in case (3) the option buyer has a 1% chance ..

  Financial manager has when managing working capital

What are the goals a financial manager has when managing working capital? What does the manager have under their control to effect the goals? What forces are working against each other in optimizing the goals of the manager?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd