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Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $210,000 and sell its old low-pressure glueball, which is fully depreciated, for $38,000.
The new equipment has a 10-year useful life and will save $46,000 a year in expenses.
The opportunity cost of capital is 11%, and the firm's tax rate is 40%.
What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation? Assume the new machine will have no salvage value. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The percent of sales method does not accurately estimate the balances for lumpy assets. which of the following statements best describes the possible errors?
Suppose your company needs to raise $45 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue alternatives: A 6 percent semi-annual coupon bond a..
Ali was one of several beneficiaries of an irrevocable trust created by his grandmother. Ali was given the right to withdraw the greater of $5,000 or 5% of the trust corpus each year. The $2 million value of the trust is included in his gross estate ..
Currently, one share of ABC stock is valued at 92. You are given the following prices of European options on one share of this stock: You buy one 95-strike call option. On the expiration date of the option, ABC stock has a price of 101 per share. Fin..
You have a short position in a put option on Google stock where the strike price is $540. If Google closes at $550 on the day that the option expires, what will be your gross payoff per share (disregarding the upfront premium)?
A company's 5-year bonds are yielding 7.8% per year. Treasury bonds with the same maturity are yielding 4.9% per year, and the real risk-free rate (r*) is 2.1%. The average inflation premium is 2.4%, and the maturity risk premium is estimated to be 0..
Car dealers are trying a number of promotional methods to induce car sales. One dealer offers a year’s supply of free gas to any consumer who buys a car during the month of July. Calculate the present value of the gas promotion
What are trusts preferred securities? What role did they play in the recent financial crisis?
The appropriate discount rate for this project is 10 percent. If the project has a 14 percent internal rate of return, what is the project's net present value?
Why do community banks not want Walmart to be in the banking business? What are the possible benefits to Walmart of such a move? What drawbacks do community bankers anticipate if Walmart is allowed to operate a full- scale bank in the United States?
What are some key financial differences between the three companies in the simulations? What primary advantages does your company bring to the table in a potential merger or acquisition? What sources of synergy are possible in your two potential tran..
NetFive Inc. is considering a leasing arrangement to finance some manufacturing equipment’s that is need for the next 3 years. The equipment’s will be obsolete and worthless after3 years. The firm will depreciate the cost of the equipment’s on the st..
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