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(Net present value calculation) Big Steve’s, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $100,000 and will generate net cash inflows of $18,000 per year for 10 years.
a. What is the project’s NPV using a discount rate of 10 percent? Should the project be accepted? Why or why not?
b. What is the project’s NPV using a discount rate of 15 percent? Should the project be accepted? Why or why not?
c. What is this project’s internal rate of return? Should the project be accepted? Why or why not?
Journalize the entries to record the following selected bond investment transactions for Southwest Bank: Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500. Received the first semi annual interest.
How do you account for the difference in sources used by firms selling essentially the same products? Explain your analysis in detail.
Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four. Does this change have an impact on their decision?
You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 8,000 of these per year for 10 years (after which time this project is expected to shut down with sol..
Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $59 million. Zang currently has 3 million shares outstanding and will issue 1.5 mill..
Suppose that today's stock price is $33.9. If the required rate on equity is 19.8% and the growth rate is 3.2%, compute the expected dividend (i.e. compute D1)
Scare Train, Inc. has the following balance sheet statement items; current liabilities of $875,962; net fixed and other assets of $1,921,620; total assets of $3,463,330; and long-term debt of $602,676. What is the amount of the firm’s net working cap..
Hiring physically challenged people to clean bowling shoes will save BowlingBackOffice, Inc (BBO) $3,000 per year for the next 5 years but will require a $10,000 investment to retrofit the work area and review operating procedures to ensure that the ..
A $200,000, 30 year, monthly payment mortgage has in interest rate of 4.5% plus two points. What is the lender’s yield if the loan is amortized over the full 30 years?
How do book values and market values affect the goal of financial managers? How will a firm determine if its level of liquidity is appropriate?
The sales-to-inventory ratio:
The common stock of Eddie's Engines, Inc. sells for $37.43 a share. The stock is expected to pay $3.40 per share next year. Eddie's has established a pattern of increasing their dividends by 5.5 percent annually and expects to continue doing so. What..
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