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A firm is considering an investment in a new machine with a price of $18.05 million to replace its existing machine. The current machine has a book value of $6.05 million and a market value of $4.55 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.75 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $255,000 in net working capital. The required return on the investment is 11 percent, and the tax rate is 34 percent. Assume the company uses straight-line depreciation. What is the NPV of the decision to purchase a new machine? What is the IRR of the decision to purchase a new machine? What is the NPV of the decision to keep the old machine? What is the IRR of the decision to keep the old machine?
If you invest the money in a stock with a beta of 1.45, what will be the required return on your $5.5 million portfolio?
Explain the funds allocation among different assets that you actually choose in your Stock-Trak portfolio.
The interest rate in Great Britain is .32 percent per month. The spot exchange rate is £.639, and the three-month forward rate is £.642.
Hayden reported the following US$ balance sheet at the time of the acquisition: Determine the goodwill impairment loss, if any, to be recorded on 12/31/15.
Carlisle Clinic, a not-for-profit organization, reported an equity balance of $1 million on its December 2012 balance sheet. Assuming Carlisle Clinic reported net income of $200,000 for the year that ended December 31, 2012, and had no other adjustme..
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. The face value of the T-bill is $10,000. What price would you expect a 6-month maturity Treasury bill to sell for?
What is the forward or expected spot exchange rate among the 2 currencies?
The Charvon oil company is planning to make a large investment in coal-to-liquids (CTL) gasoline.
Your company purchased a piece of land five years ago for $150,000 and subsequently added $200,000 in improvements. The current book value of the property is $275,000. There are two options for future use of the land:
This transaction will increase the company's current ratio if prior to the transaction the company's current ratio was
The common stock of Flavorful Teas has an expected return of 17.00 percent. The return on the market is 11 percent and the risk-free rate of return is 3.5 percent. What is the beta of this stock?
Which one of the following is not included as an input for the Black Scholes option pricing model?
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