Q: Mary Helu and Jason Haynes recently graduated from the same university. After graduation they…
A: Given that after two months their average revenue = $25,000 out of-pocket cost = $22,000 expected…
Q: A corporation has bonds that currently sell for $1,100 and have a par value of $1,000. They pay a…
A: Given Price of bond is $1,100 Par value is $1000 Annual coupon rate $100
Q: The firm has pro Target c After-tax ● ● ● The firm is consi Project A CD B E Cost of e Net inco Size…
A: Weighted average cost of capital is the weighted cost of equity and weighted cost of debt and it is…
Q: How did you derive the 36.390144336 on the last step? I've tried multiple variations of the…
A: In order to determine whether a security is "overvalued" or "undervalued," analysts use dividend…
Q: B. State whether each of the following statements is true or false, and briefly explain why. (i) In…
A: Dividend The part of the profit that is distributed to the shareholders by the company is known as…
Q: Explain how you would interprete Financial statements to your Chief Executive Officer who is a…
A: Chief Executive Officer is the highest-ranking executive in a company and such an officer is…
Q: a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the…
A: Capital budgeting tools help analyse the feasibility of a project. Theese tools help in…
Q: Calculate the Assessed Value (in $) and the tax due (in) on the Property ?. Assesed Value Property…
A: Assessed value is the value assigned to the property and is determined as a percentage of the fair…
Q: (Annual percentage yield) Compute the cost of the following trade credit terms using the compounding…
A: APR stands for annual percentage rate, which is regarded as the nominal rate, and EAR stands for an…
Q: Jiem В сок Calculate the missing information for the purkuse? Selling Price in Sales Tax Rate Sales…
A: A sale is an agreement between a buyer and a seller in which a seller exchanges money in exchange…
Q: You purchased a commercial office building for $2,200,000 one year ago. The appraisal noted the…
A: We have the NOI emanating from a commercial building. We have to find the net cash flows after taxes…
Q: A company's stock has a beta of 1.20, the risk-free rate is 1.6%, and the market risk premium is…
A: We will have to apply the CAPM model here. CAPM is the capital asset pricing model.
Q: alculate the internal rate of return for
A: Internal rate of return is the discount rate project break even financially that means present value…
Q: 2) Determine 3) Determine
A: Company has to do feasibility analysis of the project before doing investment in the projects…
Q: Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Amount $'000 2,000 1,000 500…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: If D0 = $2.00, g (which is constant) = 5.0%, and P0 = $40, then what is the stock’s expected…
A: Expected dividend yield is calculated as Expected dividend yield = D1P0 Where, D1 is expected…
Q: The Engler Oil Company is deciding whether to drill for oil on a tract of land that the company…
A: Net present value shows the money present today is more worthful than the money will receive in…
Q: Dalin’s Luggage: Sydney to Denver. Dalin Chen owns homes in Sydney, Australia, and Denver, United…
A: Purchasing power parity is a method of comparing the prices of a basket of goods in two currencies.…
Q: A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0…
A: We will compute the NPV of the two projects. The better project is the one with the higher NPV.
Q: The stock KZ has an equity beta of 1.8. The market risk premium is 5% and the current risk-free…
A: Here, Particulars Values Equity beta 1.80 Market risk premium 5.00% Current risk-free rate…
Q: Given this information: a) Compute the NPV of the investment in the firm's cost of capital is 10%…
A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…
Q: Answer the following questions to help provide the information for the paycheck. Rick works the same…
A: A check is given to the employee for the payment of his salary or wages called a paycheck. It…
Q: The following transactions of Heron Ltd took place during January 2022 in respect of component X…
A: The weighted average cost method is used for calculating the closing inventory and it is to be…
Q: at is the cash value of a three-year lease that require payments of $2097.64 payable at the…
A: Lease is type of agreement where you can pay monthly payment and use the equipment as per need and…
Q: Bliss Bar is a company that sells deluxe chocolate and candy bars based in Illinois. The company is…
A: NPV is calculated by taking all the incomes from the project and deducting all the expenses,…
Q: How much cash was Webvan burning through and why was that an important contributing factor to its…
A: Webvan, an online grocery company, was selling groceries online and delivering them directly to…
Q: you sign a discount note for $9,500 at a bank discount rate of 9% for 3 months, what is the…
A: The notes are issued at discount to the original face value of note and that discount is based on…
Q: Mrs. Dionne Jackson desires to invest a portion of her assets in rental property. She has narrowed…
A: Expected return The return that an investor expects from an investment to compensate for the risk…
Q: British Pound Futures, $=£1.00 (CME) Maturity Open High March 1.4246 1.4268 June 1.4164 1.4188 Low…
A: Honor Code: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: Maalaga borrowed a three-year loan for 80,000. If the debt a erest at a rate of 8% per month…
A: The money borrowed is paid by the monthly payment and they are easy to pay the monthly payments and…
Q: A share of stock's expected dividends is $3 per share and the expected price in 1 year is $81 per…
A: Dividend is $3 Expected price in year $81 Current price is $75.
Q: A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash…
A: The difference between the current value of cash inflows and outflow of cash over a period of time…
Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…
A: NPV The difference between the cash flowing into the business and the cash flowing out of the…
Q: What is the difference between effective rate and stated rate?
A: We have to identify the differences between effective rate and stated rate.
Q: rcentage cha
A: Theta represents the % decline in the value of an option with declining time to maturity.
Q: Please describe thoroughly about the procedure from beginning to ending process both in Forward…
A: Forward contract is derivative instrument which is used to hedge the risks. It is not a standardized…
Q: 1. If money is worth 9.25% compounded annually, calculate the present value of a 6,820 annuity that…
A: Given: Interest rate = 9.25% annuity amount = 6,820 Years = 10 Deferred for = 4 Years
Q: tock Price after Recapitalization e Manufacturing's value of operations is equal to $900 million…
A: With debt, the value of the firm is given as shown below. Value of firm=Market value of debt+Market…
Q: 2. Company A is expecting to sell 10,000 cases in July, 20,000 cases in August, and 30,000 in…
A: The sales budget is to be prepared by the sales manager in the company who is representing the…
Q: Citron buys a counterfeit production line at a price of €200,000. However, the cash flow that will…
A: So demand for first year=(100000+75000+65000)/3= Y 80000 For second year =(120000+80000+70000)/3=…
Q: Tower City aims to construct a new bypass between two main routes that will reduce commuter travel…
A: The NPV is a measure of the profitability of a project as it discounts future cash flows at an…
Q: What is the net present value of a project that has an initial cost of $40,000 and produces cash…
A: Net Present Value (NPV) of the project is the sum of the present value of all the cash inflows and…
Q: Describe the steps in creating a capital budget and how they affect your management decisions.
A: We have to identify different steps in creating a capital budget and then assess how they affect…
Q: On May 11, you get a 9% $1,800 furniture loan with monthly payments of $80. Your first payment is…
A: The mortgage is the commitment to repay the sum borrowed as a loan secured by collateral. The loan…
Q: Your 13-year old cousin comes to you again to ask more questions about the time value of money…
A: The concept of time value of money is one of the most important concepts in finance. When making…
Q: Janet borrows $3800 from a credit card company at 24.5% annually for 3 years. Determine Janet's…
A: Credit cards are used by the common person for buying and selling things but the cost of credit is…
Q: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and…
A: Given: U.S. dollar/Canadian dollar = 0.8842 U.S. dollar/Canadian dollar = 0.9001 US interest rate =…
Q: 1. Chris Coupe is a receptionist for a doctors office. She has family medical coverage through a…
A: Policies for health care that cover the entire family are regarded as family health insurance plans.…
Q: Chelsea invested the profit of his busin an investment fund that was earning 2 compounded monthly.…
A: More is the compounding of interest than more is effective interest rate and more is the future…
Q: lain the relationship between return on equity (ROE), return on asset (ROA), and leverage effect.…
A: Return on equity and return on assets shows how much is the profit earned by the company and are…
Step by step
Solved in 2 steps
- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
- St. Johns River Shipyards welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost 182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from 27,000 to 74,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 12%. What is the NPV if the firm replaces the old welder with the new one?Thaler Company bought 26,000 of raw materials a year ago in anticipation of producing 5,000 units of a deluxe version of its product to be priced at 75 each. Now the price of the deluxe version has dropped to 35 each, and Thaler is now deciding whether to produce 1,500 units of the deluxe version at a cost of 48,000 or to scrap the project. What is the opportunity cost of this decision? a. 175,000 b. 375,000 c. 48,000 d. 26,000Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
- Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of increasing competition, Mallette is considering investing in an automated manufacturing system. Since competition is most keen for dishwashers, the production process for this line has been selected for initial evaluation. The automated system for the dishwasher line would replace an existing system (purchased one year ago for 6 million). Although the existing system will be fully depreciated in nine years, it is expected to last another 10 years. The automated system would also have a useful life of 10 years. The existing system is capable of producing 100,000 dishwashers per year. Sales and production data using the existing system are provided by the Accounting Department: All cash expenses with the exception of depreciation, which is 6 per unit. The existing equipment is being depreciated using straight-line with no salvage value considered. The automated system will cost 34 million to purchase, plus an estimated 20 million in software and implementation. (Assume that all investment outlays occur at the beginning of the first year.) If the automated equipment is purchased, the old equipment can be sold for 3 million. The automated system will require fewer parts for production and will produce with less waste. Because of this, the direct material cost per unit will be reduced by 25 percent. Automation will also require fewer support activities, and as a consequence, volume-related overhead will be reduced by 4 per unit and direct fixed overhead (other than depreciation) by 17 per unit. Direct labor is reduced by 60 percent. Assume, for simplicity, that the new investment will be depreciated on a pure straight-line basis for tax purposes with no salvage value. Ignore the half-life convention. The firms cost of capital is 12 percent, but management chooses to use 20 percent as the required rate of return for evaluation of investments. The combined federal and state tax rate is 40 percent. Required: 1. Compute the net present value for the old system and the automated system. Which system would the company choose? 2. Repeat the net present value analysis of Requirement 1, using 12 percent as the discount rate. 3. Upon seeing the projected sales for the old system, the marketing manager commented: Sales of 100,000 units per year cannot be maintained in the current competitive environment for more than one year unless we buy the automated system. The automated system will allow us to compete on the basis of quality and lead time. If we keep the old system, our sales will drop by 10,000 units per year. Repeat the net present value analysis, using this new information and a 12 percent discount rate. 4. An industrial engineer for Mallette noticed that salvage value for the automated equipment had not been included in the analysis. He estimated that the equipment could be sold for 4 million at the end of 10 years. He also estimated that the equipment of the old system would have no salvage value at the end of 10 years. Repeat the net present value analysis using this information, the information in Requirement 3, and a 12 percent discount rate. 5. Given the outcomes of the previous four requirements, comment on the importance of providing accurate inputs for assessing investments in automated manufacturing systems.After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend 900,000 for new mining equipment and pay 165,000 for its installation. The mined gold will net the firm an estimated 350,000 each year for the 5-year life of the vein. CTCs cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year. a. What are the projects NPV and IRR? b. Should this project be undertaken if environmental impacts were not a consideration? c. How should environmental effects be considered when evaluating this or any other project? How might these concepts affect the decision in part b?ZZOOM, Inc., has decided to discontinue manufacturing its Z Best model. Currently, the company has 4,600 partially completed Z Best models on hand. The government has put a recall on a particular part in the Z Best model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these Z Best models to their current state. Reworking each Z Best model will cost $22 for materials and $25 for direct labor. In addition, $9 of variable overhead and $34 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. If ZZOOM completes the Z Best models, it can sell them for $180 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $105 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if ZZOOM should complete the Z Best models or sell them in their current state.