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Dayman Inc. has asked you to evaluate a proposal to buy a new costume machine. The base price is $112,000, and shipping and installation costs would add another $25,000. The machine falls into the MACRS 3-year class, and it would be sold after another 3 years for $35,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $7,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $56,000 per year. The marginal tax rate is 45%, and the WACC is 11.77%. Also, the firm spent $15,000 last year investigating the feasibility of using the machine. What is the initial investment outlay for the machine? Round answers to nearest cent (two decimal places). You must show your work to receive full credit.
He could have purchased a perpetuity that pays $X at the end of each 6 months, starting 6 months from now that earns the same effective annual rate.
According to the trade-off theory, For the same increase in interest expense, how will its free cash flow change?
How do investors management Risk & Returns on their portfolios? What are some common Risk that Financial Institutions face? How do they control these Risk?
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The prime rate averages 8 percent each year. Will the firm's CFO before interest be sufficient to meet debt service requirements and other mandatory expenditures? If prime averages 8 percent, 9 percent, and 10 percent over the three years, respective..
The current stock price for a company is $34 per share, and there are 7 million shares outstanding. This firm also has 170,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 9%, 19 years to maturity,..
Which of these stocks contributes the least risk to the portfolio? Which of these stocks has the least amount of total risk?
What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
Goodwin Technologies, a relatively new company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. "Investors prefer the deferred tax liability that ca..
Determine the fair present value of the bond if market conditions justify a 11 percent, compounded quarterly, required rate of return.
Why is planning enforcement important and how does it operate in Victoria?
Profitability Ratios PJ's Ice Cream Parlor has asked you to help piece together financial information on the firm for the most current year.
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