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One year ago, your company purchased a machine used in manufacturing for $95,000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $140,000 today. The CCA rate applicable to both machines is 20%; neither machine will have any long-term salvage value. You expect that the new machine will produce earnings before? interest, taxes, depreciation, and amortization (EBITDA) of $40,000 per year for the next ten years. The current machine is expected to produce EBITDA of $20,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 45%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year-old machine?
What is the NPV of the replacement?
Explain what “capital adequacy” means. Then explain how it has been used to try and address risk management of banks. Finally, as an opinion, relate if you think this has been helpful through the Basel Accords.
Its required return (rs) is 12%. What is the best estimate of the current stock price?
The Judy Gray Income Tax Service is analyzing its customer service operations during the month prior to the April filing deadline.
You have the opportunity to purchase a 25-year bond, $1,000 par value bond that has an annual coupon rate of 9%. If you require a YTM of 7.6%, how much is the bond worth to you?
If you use a discount rate of 0.07 for investment products, what is the present value of this growing perpetuity?
Suppose you invest $1000 into a mutual fund that is expected to earn a rate of return of 11%. How much money will you have in 10 years? If $8000 is invested in a certain business at the start of the year, the investor will receive $2400 at the end of..
A firm has total assets of $162,000, long-term debt of $46,000, stockholders' equity of $95,000, and current liabilities of $21,000. The dividend payout ratio is 60 percent and the profit margin is 8 percent. Assume all assets and current liabilities..
What is the price today of a $1,000 bond with a coupon rate of 10 percent and a current yield of 8 percent over 3 years? (round to the nearest whole dollar)
How exactly do you figure out the magnitude of credit risk for each situation?
If the dividend per share expected during the coming year, D1, is $3.00 and g = 4%, at what price should a share sell?
Testing the validity of your calculations by subjecting them to change is known as-Qualitative testing, Horizontal analysis, Vertical analysis, Sensitivity analysis.
In theory, if two companies have identical capital structure, then they should both use the same discount rate for valuing a particular project, i.e., the discount rate does not depend on which company is evaluating the project.
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