What is the minimum annual cash flow

Assignment Help Financial Management
Reference no: EM131521816

Most businesses replace their computers every two to three years. Assume that a computer costs $2,000 and that it fully depreciates in 3 years, at which point it has no resale value and is thrown away.

a. If the interest rate for financing the equipment is 5 percent, what is the minimum annual cash flow that a computer must generate to be worth the purchase?

Instruction: Round your answers to the nearest dollar.

The minimum annual cash flow must be at least $.

b. Suppose the computer did not fully depreciate but still had a $250 value at the time it was replaced. What is the minimum annual cash flow that a computer must generate to be worth the purchase?

The minimum annual cash flow must be at least $.

Reference no: EM131521816

Questions Cloud

Make appropriate tax adjustment : Compute the yield to maturity on old issue and use this as yield for the new issue. Make appropriate tax adjustment to determine aftertax cost of debt.
What will be the firm cost of common equity : Using the DCF approach, what is its cost of common equity? what will be the firm's cost of common equity using the CAPM approach?
What is current yield or cost of the preferred stock : What is the current yield or cost of the preferred stock?
What is the aftertax cash flow from sale of this asset : Consider an asset that costs $255,200 and is depreciated straight-line to zero over its 10-year tax life. what is the aftertax cash flow from sale of this asset
What is the minimum annual cash flow : Most businesses replace their computers every two to three years. what is the minimum annual cash flow that a computer must generate to be worth the purchase?
Higher economic benefits with less risk : Determine whether or not there are other Asian countries that could provide Blades with the same or higher economic benefits with less risk.
What would the estimated property value and land value : What would the estimated property value and land value be under the above assumptions?
Write overview about cost-volume-profit : Write overview about Cost-volume-profit (CVP)
What is the cost of common stock for whitewall : Whitewall Tire Co. just paid an annual dividend of $1.20 on its common shares. what is the cost of common stock for Whitewall?

Reviews

Write a Review

Financial Management Questions & Answers

  Arithmetic average annual return on large-company stocks

Consider the following information on large-company stocks for period of years. What was arithmetic average annual return on large-company stocks in real terms.

  Using the double declining balance method for depreciation

The Big Deal Company has purchased new furniture for their offices at a retail price of $100,000. An additional $20,000 has been charged for insurance, shipping and handling. The company expects to use the furniture for 8 years (useful life = 8 years..

  What is the projects net present value if the required rate

A project is expected to create operating cash flows of $33,000 a year for three years. The initial cost of the fixed assets is $68,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be req..

  Pay someone else to put our waste into a landfill

The world's largest carpet maker has just completed a feasibility study of what to do with the 16, 000 tons of overruns, rejects, and remnants it produces every year. The company's CEO launched the feasibility study by asking, why pay someone to dig ..

  Amount of the annual interest tax shield if the tax rate

Binet Homes has 4,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 7%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 40%?

  What factors would you consider before investing

As an investor, what factors would you consider before investing in the emerging stock market of a developing country?

  Calculate the beta of portfolio

Calculate the beta of your portfolio, which comprises the following items: (a) Olympic Steel stock, which has a beta of 2.2 and comprises 40 percent of your portfolio, (b) Rent-a-Center stock, which has a beta of 1.5 and comprises 28 percent of your ..

  Calculate the expected return and the volatility

Suppose Johnson? & Johnson and the Walgreen Company have the expected returns and volatilities shown? below, with a correlation of 21.7%. calculate: The expected return. The volatility? (standard deviation). The expected return. The expected return o..

  Dividend is expected to grow at constant rate

Hart Enterprises is expected to pay a $0.50 per share dividend one quarter from today. The quarterly dividend is expected to grow at a constant rate of 1% per quarter. Suppose you require a effective return of 12% a year. How much are you willing to ..

  Compute gain or loss in the futures market after transaction

On August 2, a securities dealer, Ms. Cindy Zaicko, responsible for a $10 million bond portfolio is concerned that interest rates are expected to be highly volatile over the next 3 months. The fund manager decides to use Treasury bond futures to hedg..

  What is present value-assume the appropriate discount rate

An investment will pay you $91,000 in five years. Assume the appropriate discount rate is 6.25 percent compounded daily. What is the present value?

  When making domestic security market decisions

Do Financial Institutions Need to Consider Foreign Exchange Market Conditions When Making Domestic Security Market Decisions?

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