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Your construction company is evaluating the proposed acquisition of a new earthmover. A consulting company you hired developed the following analysis last year at a cost to you of $6,000. The earthmover's basic price is $50,000 and will need to be modified for your purposes for another $10,000. The earthmover falls into the 3 year MACRS class and will be sold at the end of 3 years for $25,000. Use of the earthmover will require an immediate increase of $2,000 in spare parts inventory (working capital), which is expected to be fully recovered when the earthmover is sold. The earthmover is expected to save $20,000 in labor costs each year. Your company's marginal tax rate is 34% and your cost of capital is 10%. You must now make a decision. What is this purchase's NPV?
The capital structure of Wild West Inc. is as follows: Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par Preferred shares: $2,000,000
Q. Explain Dividend Policy Decision? Dividend Policy Decision: - The financial management has to make a decision as which portion of the profits is to be distributed as dividen
1) According to the IFE (RIP), if U.S. investors expect a 3% rate of domestic inflation over one year, and a 6% rate of inflation in European countries that use the EUR, and requir
Previous MOS = 750 - 270 = 480 aircraft; Revised MOS = 750 - 420 = 330 aircraft Explanation that a lower MOS = lower levels of profit and therefore exposes the business to more
numericals with solutions
Define why we measure a project’s risk as the change in the CV. We calculate a project’s risk as the change in the coefficient of variation since this focuses on the change in
Calculate the Operating Cashflows from 2007 - 2011 using the indirect method to add back depreciation. Suppose that depreciation will grow at the similar rate as sales.
Let us consider a bond with callable or prepayable feature. Figure shows the price/yield relationship of option-free bond and callable bond. The price yield
Why do financial managers calculate the marginal tax rate? Financial managers make use of marginal tax rates to estimate the future after-tax cash flows from investments. As th
Define country risk. How is it different from political risk? Country risk is a broader quantify of risk as compared to the political risk, as the former encompasses political ri
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