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Chase manufacturing inc. is considering the purchase of a new super computer for $120,000. the purchase of this compurter will result in an increase in earnings before interest and taxes of $25,000 per year. To the computer properly, workers would have to go through a brief training session that would cost $1,200 after taxes. It would cost $2,000 to install the computer properly. Also, because the machine is extremely efficient, its purchase would necessitate an increase in inventory of $10,000. This computer has a useful life of 5 years after which it will have no salvage value. Finally to purchase the new computer, it appears that the firm would have to borrow $50,000 at 7% interest from its local bank, resulting in additional interest payments of $3,500 per year. Assume simplified straight line depreciation and that the machie is being depreciated down to zero, a 34% marginal tax rate, and a required rate of return of 10 percent.
A. what is the initial outlay associated with this project?B. what are the annual after-tax cash flows associated with this project for years 1-4?C. What is the terminal cash flow in year 5 (what is the annual after-tax cash flow in year 5 plus any additional cash flows associated with the termination of the project)?D. Should the machine be purchased?
Find out the compound amount if $6,400 is invested for 2 years at 12% compounded monthly. What difference would compounding daily make in this example?
Project A has an IRR of 15%. Project B has an IRR of 14%. Both projects have a required rate of return of 12%. Which of the following statements is most correct?
ow might the bank be able to involve its own customers in designing its web site and pricing its Internet service package?
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a 10 year bond pays 5% on a face value of $1,000. If similar bonds are currently yielding 10%, what is the market value of the bond? Use annual analysis.
Commercial paper is usually sold at a discount. Company A has just sold an issue of ninety day commercial paper with a face value of 1 million dollar.
If the objective is to keep the price level the same next yr illustrate what percentage increase in the money supply should the central bank plan
what was the most recent dividend per share paid on the stock?
If the firm's preferred stock is NON CUMULATIVE and the 20X8 dividend declared amounts to a total of $20,000, how much will go to PREFERRED stock holders?
At the end of 2005, the Long Life Light Bulb Corporation declared it had produced a gross profit of $1 million. The company has also established that over the course of this year it has incurred $345,000 in operating costs and $125,000 in interest co..
Illustrate the functions and roles played by financial markets and institutions, particularly as they relate to the flow of funds from lenders to borrowers within the global financial system
Assume that if you take the rebate, you will apply it toward the purchase. Which alternative is better deal?
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