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Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise, because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins’ cost of capital is 14%. Should the firm replace its old knitting machine, and, if so, which new machine should it use? By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine.
Assume that you have been asked to forecast demand for your company's new product, signature t-shirts.
ABC Corporation issues a bond which has a coupon rate of 11.40%, a yield to maturity of 9.75%, a face value of $1,000, and a market price of $1,145.
What is the maximum amount you can earn (in dollars) via locational arbitrage if you have access to 10 million dollars?
Backwater Corp. has 9 percent coupon bonds making annual payments with a YTM of 8.3 percent. The current yield on these bonds is 8.65 percent. How many years do these bonds have left until they mature?
A loan of 100,000 is payable over five years with monthly payments of 60,000 commencing one month after the inception date. The loan repayment is 2,000 per month and the nominal rate 10 per cent. How much capital remains at the end of five years? bui..
Calculate the cash flows from the changes in the following from the end of 2014 to the end of 2015.
A corporate bond’s annual interest is 5%, paid semi-annually and it matures in 12 years. If other bonds of similar risk return 4% annually, what is the value of the bond today?
You are an investor in a 35% tax bracket. Evaluate your decision on after-tax basis.
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. What was his annual rate of return on this sculpture?
What will be the flotation-adjusted cost of equity?
A trader creates a straddle by buying a call option and a put option, and holds it until maturity.
Discuss savers and investors role in financial markets. Explain what a firm's goal is from both a shareholder and stakeholder approach.
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