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Your firm is contemplating the purchase of a new $550,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $54,000 at the end of that time. You will save $290,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $69,000 (this is a one-time reduction). If the tax rate is 30 percent, what is the IRR for this project?
The Holmes Company’s currently outstanding bonds have an 8% coupon and a10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes’ after-tax ..
Suppose you take out a loan for $24,475 to purchase a 2016 Nissan Altima. Nissan offers $500 cash back (which you use as part of the down payment), and you also put $2,299 of your own money down (so a total down payment of $2,799). After three years..
Mr. Bill S. Preston, Esq. purchased a new house for $90,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 11 percent compound interest on the unpaid balance..
The government of Berhama needs to raise $5,000 by taxing snorkels and kayaks.- What tax should it levy on each of the two goods?
The spot price of copper is $70 per ounce. The 9-month forward price is $72.13. The continuously compounded risk-free rate is 5%. What is the annualized lease rate for this copper contract?
Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 y..
Mark to market refers to an accounting in which a security's value is recorded in a company's books at its current market value rather than its book value managing assets managing capital investments maintaining a conservative environment in the orga..
Hybrid cars are touted as green alternatives; however, the financial aspects of hybrid ownership are not as clear. Consider a hybrid model that has a list price of $5,500 (including tax consequences) more than a comparable car with a traditional gaso..
A bond with a face value of $18,000 and a 2.7?% interest rate? (compounded semiannually?) will mature in 9 years. What is a fair price to pay for the bond ?today? A fair price to buy the bond at would be $____
Mikkelson Corporation's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free r..
The Educated Horses Corporation needs to raise $20 million to finance its expansion into new markets. Suppose the offer price is $40 per share and the company's underwriters charge an 8 percent spread. The SEC filing fee and associated administrative..
One of the most important operating expenses for the Olde Virginia Brick Company is natural gas, which is used to bake and dry the bricks. Natural gas prices have recently been quite volatile, now approaching $6 per mcf. If Olde Virginia does not hed..
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