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ACME Manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost $1 million, have a five-year life, and be depreciated using MACRS over three years. At the end of five years, the new line could be sold as scrap for $150,000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a savings of $40,000 per year before tax and unadjusted for inflation (in today's dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $110,000 per year (in today's dollars). If ACME invests in the new line, a one-time investment of $10,000 in additional working capital will be required. The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of inflation is 4.90 percent. What is the NPV of the new production line?
Starbucks opened its 1st store in Zagreb, Croatia in October 2010. The value of a tall vanilla latte in Zagreb is 25.70kn. In New York City, the value of a tall vanilla latte is $2.65. The exchange rate between Croatian kunas (kn) and U.S. dollars is..
Ron's Pharmacy has collected $600 in sales taxes during the March. If sales taxes must be remitted to state government monthly, what entry will Ron's Pharmacy create to demonstrate the March remittance?
Returns for the Shields Corporation over the last three years are shown below. Calculate the standard deviation of Shields' returns?
What is Capital budgeting and assess the conclusions we might make about the wisdom of undertaking this project
What is the length of the firm's cash conversion cycle and What would happen to Saliford's cash conversion cycle if, on average, the length of time that products remain in inventory is shortened to 45 days?
ORNE Company plans to raise $2 million to pay off its existing short-term bank loan of $600,000 and to rise total assets by $1,400,000. The bank loan bears an interest rate of 10%.
J Hennessy Corporation is entirely financed through common stock and has a beta of 1.2. The stock has a value earnings multiple of ten and is priced to offer a 10% expected rate of return.
Saunders Corp. has a book net worth of $13,655. Long-term debt is $9,100. Net working capital, other than cash, is $3,720. Fixed assets are $18,280 and current liabilities are $1,990.
The Griffey Lang Food Corporation faces a difficult problem. In management's effort to grow the business, they accrued a debt of $150 million while the value of the company is only $125 million.
Computation and capital budgeting decision based on IRR and should the project be accepted if it has been assigned a required return of 9.5%
Construct payoff and profit diagrams for the purchase of a 950-strike S&R call and sale of a 1000-strike S&R call. Verify that you obtain exactly the same profit diagram for the purchase of a 950-strike S&R put and sale of a 1000-strike S&R
a project has a forecast cash flow of $128 in 1 year and $139 in year 2. The interest rate is 7%, the estimated risk premium on the market is 12.00% and the project has a beta of .68.
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