Reference no: EM133119258
UNIK Autos is considering replacing the old assembly line with the new one at their Unik Mini Manufacturing Plant in Trois Riviere, Quebec. The old assembly line has a current market value of $10,000,000 and zero salvage value after 10 years. The new assembly line will generate incremental pre tax cash flow of $5,000,000 per year for 10 years and will have zero salvage value after 10 years of use. The assembly line will be depreciated at a CCA rate of 30%. UNIK Autos is in 40% tax bracket and r0 = 10%. Treasury bills are yielding 3% rate of return.
a. What is the maximum price UNIK should be willing to pay for the assembly line?
b. Suppose the price of the new assembly line is $40,000,000. UNIK will issue $20,000,000 worth of debt to finance the purchase. Under the loan agreement UNIK will pay 6% interest annually on the outstanding balance. UNIK will also make year end principal payments of $5,000,000 per year, completely retiring the issue at the end of 4th year. Ignore cost of financial distress and issue cost. Determine APV.
c. To encourage UNIK to replace old assembly line, Quebec Government is willing to lend $20,000,000 at an interest rate of 2% per year for 5 years. Principal to be repaid at the end of 5th year. Now what is the maximum price UNIK would be willing to pay for the assembly
line?
|
Why lambda is a better liquidity measure
: Provide two reasons why Lambda is a better liquidity measure than the Current Ratio point form please
|
|
Consider your first day at previous job
: Consider your first day at a previous job. How did you prepare for this new role? What is a tip you could give to a friend starting out at a new job?
|
|
Excel online structured activity
: Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants hi
|
|
How much will you pay over the life of the loan
: A loan is $51,232 at 3.8% interest over 4 years. How much will you pay over the life of the loan in each way using FV and PMT function
|
|
What is the maximum price
: UNIK Autos is considering replacing the old assembly line with the new one at their Unik Mini Manufacturing Plant in Trois Riviere, Quebec. The old assembly lin
|
|
Research-based explaining what pay transparency
: Write a research-based explaining what pay transparency is. Explain each end of the spectrum
|
|
What is the current total firm value of allied biscuit
: Allied Biscuit Co. is expected to generate a free cash flow (FCF) of $15,005.00 million this year (FCF1 = $15,005.00 million), and the FCF is expected to grow a
|
|
What is the present value of growing perpetuity
: What is the present value of growing perpetuity that generates a cash flow of 35 years and grow at a rate of 7% a year forever, if if discount rate is 5% a year
|
|
Compute the ebit-eps indifference point
: Tiger Woods and Lumber has a capital structure of 10 million shares of common stock, $200 million of first-mortgage bonds with a coupon rate of 13%, and $40 mil
|