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St. Johns River Shipyard's welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $84,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $56,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the firm's WACC is 12%. What is the NPV of the project? Round your answer to the nearest cent.
Burklin, Inc., has earnings of $18.6 million and is projected to grow at a constant rate of 4 percent forever because of the benefits gained from the learning curve. Currently, all earnings are paid out as dividends. Estimate the value of the stock. ..
Consider a firm with a contract to sell an asset for $165,000 four years from now. The asset costs $94,000 to produce today. Given a relevant discount rate on this asset of 13 percent per year, will the firm make a profit on this asset?
Compare and contrast mature profitable firms with stable cash flows with firms with higher risk (dependencies on economy) with unstable cash flows. What risks do they take in regards to leverage use, tax shields and trading information between manage..
Historical costs are all of the following except that they:
You own a portfolio that is 30 percent invested in Stock X, 25 percent in Stock Y, and 45 percent in Stock Z. The expected returns on these three stocks are 9 percent, 18 percent, and 14 percent, respectively. What is the expected return on the portf..
Primrose Corp has $20 million of sales, $3 million of inventories, $3 million of receivables, and $2 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 7% rate. Assume 365 days in year f..
Okie Industries purchased a CNC machine 5 years ago for $125,000. It is being depreciated on a straight-line basis over 15 years to an estimated salvage value of $0. It could be sold now for $50,000. The firm is considering selling if and purchasing ..
A 10-year annuity pays $1,850 per month, and payments are made at the end of each month. If the interest rate is 12 percent compounded monthly for the first five years, and 8 percent compounded monthly thereafter, what is the present value of the ann..
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $540,000 is estimated to result in $225,000 in annual pretax cost savings. The press falls in the MACRS five-year class, ..
PK Software has 9.1 percent coupon bonds on the market with 22 years to maturity. The bonds make semiannual payments and currently sell for 112 percent of par. What is the current yield on PK's bonds? What is the effective annual yield?
What happens if a consumer purchases a product that does not live up to his expectations following an extensive consumer decision making process?
A company issues debentures worth Rs. 100 crore and pays on interest of Rs. 10 crore at the end of 1year. What is the actual cost of debt if the prevailing tax rate is 40%?
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