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Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,610,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,320,000 in annual sales, with costs of $1,310,000. The project requires an initial investment in net working capital of $167,000, and the fixed asset will have a market value of $192,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 6 percent. Requirement 1: What is the net cash flow of the project for the following years?
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 12 percent, and that the maximum allowable payback and discounted payba..
Calculate the current return on a stock of your choice and compare it to returns on bonds. Which is better to invest in presently a stock or a bond in this company and why? Please explain
Your firm is contemplating the purchase of a new $660,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $52,000 at the end of that time. You will be able to reduce wor..
R.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year's annual dividend is expected to be $1.55 a share. The dividend growth rate is 2 percent. The firm also has 7,500 bonds outstanding with a face valu..
Winnebagel Corp. currently sells 35,000 motor homes per year at $73,000 each, and 14,500 luxury motor coaches per year at $110,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 30,000 of the..
Bronco Co. is a U.S.-based MNC that has subsidiaries in Spain and Germany. Both subsidiaries frequently remit their earnings back to the parent company. The Spain subsidiary generated a net outflow of €1,000,000 this year, while the German subsidiary..
Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 7.19% while the borrowing firms corporate tax rate is 34%. The after tax cost of debt debt for the firm is ________% Common stock for a firm..
For the next 8 years, you decide to place $4454 in equal year end deposits into a savings account earning 9.85 percent per year. How much money will be in the account at the end of that time period?
A company is 35% financed by risk-free debt. The interest rate is 12%, the expected market risk premium is 9%, and the beta of the company's common stock is 1.5. What is the company cost of capital? What is the after-tax WACC, assuming that the compa..
You buy a house for $150,000 using a 30-year mortgage at 4.5% interest to be paid monthly.1. What is your payment? 2.Your generous parents agree to give you $10,000 toward your home 4.They offer either to make a down payment (lessening the principal ..
You buy a share of The Ludwig Corporation stock for $18.30. You expect it to pay dividends of $1.02, $1.14, and $1.2741 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $28.80 at the end of 3 years. Calculate the growth rat..
A mortgage banker had made loan commitments for $20 million in three months. How many contracts on Treasury bonds futures must the banker write or buy?
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