What is the future worth of this investment

Assignment Help Financial Management
Reference no: EM131506441

Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $100,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow 1/2 of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 10.0% compounded annually. Aerotron Electronics’ MARR is 10% compounded annually. What is the future worth of this investment?

Reference no: EM131506441

Questions Cloud

What is the expected capital gains yield and dividend yield : The next dividend payment by United Corporation will be $1.50 per share. what is the dividend yield? what is the expected capital gains yield?
Describe the tax consequences to green corporation : Describe the tax consequences to Green Corporation and its shareholders.
How is goldman sachs still in business with no assets : Compare Goldman Sachs to JP Morgan and why did Goldman Sachs need to be bailed. How is Goldman Sachs still in business with no assets?How is Goldman Sachs still
Ending equity was : During the last year, sigma co had a net income of $142, paid $18 in dividends, and sold new stock for $32. Ending equity was
What is the future worth of this investment : Aerotron Electronics is considering purchase of water filtration system to assist in circuit board manufacturing. What is the future worth of this investment?
The intrinsic value of an asset is the present value : The intrinsic value (not market value) of an asset is the present value of all expected cash flows it is expected to generate.
How much would a share of preferred stock cost : How much would a share of preferred stock cost today if the dividends begin exactly 5 years from now instead of next quarter?
What is the updated value of the bond : the market rates are cut down by 50 basis points. What is the updated value of the bond?
What is advances pretax cost of debt : Advance, Inc., is trying to determine its cost of debt. What is Advance's pretax cost of debt?

Reviews

Write a Review

Financial Management Questions & Answers

  Find the forward premium from the american point of view

The €/$ spot exchange rate is $1.20/€ and the one year forward price is €.85/$. Find the forward premium (discount) from the American point of view.

  Incremental cost of going outside versus conducting survey

Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..

  What is the contribution to asset base of under Base III

What is the contribution to the asset base of the following items under the Basel III requirements?

  Calculate its cost of common stock

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $2.50 per share, and the current price of its common stock is $50 per share. The expected growth rate is 8 p..

  Calculate the net present value of growth opportunities

The current market price of Canadian Fire Sale Corp. equity is $30 per share. Analysts estimate that Canadian Fire Sale will report earnings-per-share (EPS1) of $2.50 in one year. The required return on Canadian Fire Sale shares is 10 percent. Calcul..

  Good cash flow estimates be as part of investment equation

Assume that you are the CFO of a local YMCA. You and your administrative team are considering making an investment in a day care facility to meet the ongoing child care needs of your members. What would your decision be if the NPV were negative? What..

  Compare to current yield-to-maturity on a one-year strips

Use the following information to answer the next question: U.S. Treasury STRIPS, close of business Aug 15, 2016: According to the pure expectations theory of interest rates, how much would you expect to pay for a one-year STRIPS on Aug 15, 2017? What..

  Review the financial statements of tesco plc

Explain the essence of each ratio that you have selected and briefly explain their importance - give a very brief background information about Tesco Plc, the current issues and their position in the retail industry

  Fill in the balance sheet for the jamestown company

Fill in the balance sheet for the Jamestown Company based on the given data (assume a 365-day year):-Sales = $3,650,000 - Total asset turnover = 4x -Current ratio = 3:1.

  What are the arithmetic and geometric returns for the stock

A stock has had the following year-end prices and dividends: What are the arithmetic and geometric returns for the stock?

  Returns distributed uniformly and continuously

Suppose stocks X, Y and Z have monthly returns distributed uniformly and continuously. The uniform distributions are between -10% and 10% for stock X, between -12% and 8% for Y and between -5% and 10% for stock Z. A fund manager wants to select a sto..

  What are the key components of an fha loan

What is an FHA loan and how long have they been in existence?- What are the key components of an FHA loan?- What are the five eligibility requirements?

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