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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's basic price is $1,000,000 and our accountant requires that it be written off over its 5 year class using straight line depreciation to a book value of $0. Purchase of the machine would require an increase in net working capital of $20,000 at t=0 only. The machine would increase the firm's before tax revenues by $960,000 per year but would also increase operating costs by $100,000 per year. It is expected to be used for 3 years and then be sold for $800,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 18 percent. (Please show your work) a) What is the net investment required at t=0? b) What are the operating cash flows each year? c) What is the total value of ending (non operating) cash flow in year 3? d) What is the project's NPV?
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What is the expected return on the following portfolio? Stock $ Invested Expected Return CDE 80,000 6% LMN 40,000 16% WXY 50,000 17%. Suppose you buy a stock for $44.73, receive a dividend of $4, and sell it for $39.33. What is your total rate of ret..
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