Precision Tool should purchase Machine _____ because it lowers the firm's annual cost by approximately _______ as compared to the other machine.
Q: Pulangan Geometrik = __% Geometric return=_%
A: To determine the geometric mean, we first need to compute the change in price using the formula…
Q: Tin Roof's net cash flows for the next three years are projected at $72,000, $78,000, and $84,000,…
A: Terminal value is calculated by followsing formula:-Terminal value = whereFCF = free cash flowsg =…
Q: Huang Company's last dividend was $2.45. The dividend growth rate is expected to be constant at…
A: Current Dividend = d0 = $2.45Growth Rate for First 3 Years = g3 = 22.5%Constant Growth Rate after…
Q: Solve for the unknown interest rate in each of the following: Note: Do not round intermediate…
A: We need to use RATE function in excel to calculate interest rate. The formula is: = RATE( NPER,…
Q: 4 year old college graduate who atrick has decided it is time to gr ows that he can afford a monthly…
A: The PV of all monthly payments is the value of the home Patrick can afford.
Q: Debt Ratio (current) Equity Ratio (current) Cost of Debt Market Risk Premium. Equity Beta Debt Beta…
A: Cost of capital:The term "cost of capital" refers to the expense a company incurs in order to…
Q: Nesmith Corporation's outstanding bonds have a $1,000 par value, a 8% semiannual coupon, 8 years to…
A: Par value is $1,000Coupon rate is 8%Coupon frequency is semi annual i.e. 2Time to maturity is 8…
Q: Katrina has the option of an 8-year nonsubsidized student loan of $29,000 at an annual interest rate…
A: A subsidized loan refers to a loan (usually provided to students) where the loan does not accumulate…
Q: On July 1, an investor holds 100,000 shares of a certain stock. The market price is $100 per share…
A: Hedging is a process of risk management through which the risk of financial investments is…
Q: Ryan Enterprises forecasts the free cash flows (in millions) shown below. Assume the firm has zero…
A: Weighted Average Cost of Capital = r = 13%Growth Rate after year 3 = g = 5%Free Cash Flow for year 1…
Q: Which comes closest to the future value of $875 to be received at the end of 7 years, if the amount…
A: Solution:When some amount is invested somewhere, it earns interest on it.The amount initially…
Q: You have heard about the impending retirement crisis facing the global community and you want to…
A: Monthly Deposits (PMT) is $380Time Period (n) in years is 40Interest Rate (r) is 7.74%Compounding…
Q: Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index…
A: A portfolio that has been perfectly balanced between risk and return is said to be optimum. The best…
Q: you are considering buying 24 zero bonds with par value at $1000, with 14 years to maturity and a…
A: Value of bond = FV = $1,000Years to maturity = nper = 14 years = 14*12 = 168 monthsinterest rate =…
Q: Required: (a) Determine the value of the following: N = I/Y = PMT= $ FV = $ (b) The present value of…
A: An interest-bearing note is a debt instrument that bears interest over time. It is a promissory note…
Q: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and…
A: The Two-Factor Capital Asset Pricing Model (CAPM) is an extension of the traditional CAPM. In…
Q: What is the dollar amount of each payment Michael pays?
A: Monthly payments refer to the set sum of money that a borrower must pay back on a loan each month.…
Q: The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed…
A: Net Present Value (NPV) is used to evaluate the profitability of an investment or project and it…
Q: You save (pay) $1,000 a month for the next 10 years. A total of 120 monthly saving (payment). The…
A: We need to use present value of annuity due formula to calculate present value today.WherePV =…
Q: What is the yield to maturity of the August 2001 Treasury bond? (Round to three decimal places)
A: YTM or yield to maturity is the annual return that a bond holder would receive if they held the bond…
Q: f discretionary expenses are $500, cash flow before discretionary expenses are $2,000, and…
A: Discretionay expenses are not necessary expenses and expenses done after necessary expenses.
Q: 2. You examine information from the following firms A B 9 110 Firm Net Income Sales Assets Equity I…
A: The Du-pont analysis, is an equation to calculate the ROE ( Return on equity ) of a firm.The…
Q: Which alternative would you choose as a base one? Choose the correct answer below. XA Alternative A…
A: The internal rate of return(IRR) is used to evaluate the profitability of an investment project. It…
Q: A U.S. firm holds an asset in France and faces the following scenario: State 1 State 2 State 3 State…
A: A hedge fund is defined as an investment fund which generally has liquid assets and utilises complex…
Q: Susan starts an electric bicycle company with her savings of $200,000. Her new business is…
A: Post Money Valuation:The complete value of a company immediately following an investment is referred…
Q: At the beginning of the year I have $125,000 to invest. I build my optimal portfolio by doing…
A: Solution:When an amount is invested somewhere, it earns interest on it.Weight of an asset in the…
Q: Enrich, Inc., has expected earnings of $4 per share for next year. The firm's ROE is 16%, and its…
A: Solution:Present Value of Growth Opportunities (PVGO) is the method to estimate the share price of a…
Q: You have been asked by the president of your company to evaluate the proposed acquisition of a new…
A: Variables in the question:Initial cost=$50,000 Sale value of truck after 3 years=$20,100 Increase in…
Q: On October 5, Tristan Sandino borrowed $3,050 to buy an English bulldog. The loan carried a rate of…
A: Simple interest is that interest amount which is computed only on the principal amount. In contrast…
Q: a. If U.S. Treasury bills currently yield 2.8 percent and you expect the market to increase at an…
A: The constant growth model is a stock valuation method used in finance to determine a stock's…
Q: You are given a nominal annual rate of disc Hint: Let X be the value on 1/1/2010. The fut O <$10,500…
A: Present value is today equivalent value of the future money based on the time value of money and…
Q: You are shopping for a car and read the following advertisement in the newspaper: "Own a new…
A: Solution:-When an equal payment is made each period at end of period, it is known as ordinary…
Q: how much money does the lender get in March from his hedged lending of £10 million?
A: A Money Market Hedge is a financial strategy employed by businesses and individuals to manage…
Q: Valuation with price/earnings multiples For the firm shown in the following table, use the data…
A: Solution:Price earnings multiple represents the times at which price of stock is trading in…
Q: income for the year was $29,000 and dividends were $6,400. What is the sustainable growth rate for…
A: The sustainable growth rate measures the greatest rate at which a business can expand its revenue,…
Q: OnTheMove Inc. has profit margin of 9%, total asset turnover of 1.5, equity multiplier of 2 and a…
A: Sustainable growth rate is the maximum growth rate that a company can sustain without having to…
Q: Intro The annual interest rate is 4%. Part 1 What is the present value (PV) of $1,000 that you'll…
A: Solution:When amount is invested somewhere, it earns interest on it. The amount initially invested…
Q: Year 2019 2018 2017 2016 2015 2014 2013 Dividend per Share $2.79 $2.66 $2.53 $2.41 $2.30 $2.19 $2.08
A: Required return= 14.8%Risk-free rate= 5%Dividend for 2013 = $2.08Dividend for 2014 = $2.19Dividend…
Q: A Malaysian company expects to have to pay 1 million Canadian dollars in six months... Explain how…
A: Exchange rate risk, also known as currency risk or foreign exchange risk, arises when a company is…
Q: What is the sustainable growth rate given the following information: Shareholders' equity $650,000;…
A: Solution:Sustainable growth rate means the constant rate at which the firm’s share price is…
Q: If you deposit $63,679.00 at 10.16% annual interest compounded quarterly, how much money will be in…
A: As per Bartleby honor code, when multiple questions are asked, the expert is required only to solve…
Q: Time value of money question: Envision you are approached with an investment opportunity. You are…
A: Time value of money:The concept of the "time value of money" refers to the principle that a dollar…
Q: Suppose a gold mining company has a short hedge on 1000 ounces of gold using futures contracts. The…
A: Future contracts are the derivative type of instruments that can be used by an investor to reduce…
Q: Different levels of financial market efficiency and their examples.
A: Financial market efficiency refers to how well prices in a particular market reflect all available…
Q: 6. Your company will generate $68,000 in annual revenue each year for the next seven years from a…
A: We need to use present value of ordinary annuity formula to calculate present value of…
Q: Analysts project the FIN340 Company's upcoming 5 years of (undiscounted) cash flow is as follows:…
A: Fair Market Value refers to the market value of the shares as per the prevailing market conditions…
Q: Nona purchased a new car earlier today for $33,000. She financed the entire amount with a six-year…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: Common stock value-Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.49…
A: Price of the share is the PV of all future dividends discounted at the required return. The formula…
Q: [The information presented here applies to questions 11 and 12.] The lease for a tenant occupying…
A: In the context of lease renewals and expected brokerages, let me clarify the meaning of the…
Q: Fountain Corporation's economists estimate that a good business environment and a bad business…
A: This is a question based on cash flow waterfall. The project payoff will be first used to retire the…
Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent
Step by step
Solved in 3 steps with 2 images
- 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?Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins’ cost of capital is 14%. Should the firm replace its old knitting machine? If so, which new machine should it use? By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine?The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
- Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.Although 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?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?
- Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.Choose the correct answer for the following question: Your company is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 10 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $300,000, annual operating costs of $42,000, and a 5-year life. Machine B costs $265,000, has annual operating costs of $50,000, and a 4-year life. The company currently pays no taxes. Which machine should be purchased and why? (Hint: consider the equivalent annual cost-EAC of the two machines) A. Machine A; because it will save the company about $8,783 a year B. Machine A; because it will save the company about $14,670 a year C. Machine B; because it will save the company about $11,482 a year D. Machine B; because it will save the company about $9,916 a year E. Machine A; because it will save the company about…Cari Pump (CP) Company is considering either upgrading or replacing its production equipment. The company produces and sells annually 7,000 pumps at a selling price of $850 each. The current production equipment, purchased for $1,850,000 and with a five-year useful life, is only two years old and is depreciated on a straight-line basis. Also, it has a terminal disposal value of $0 and a current disposal price of $500,000. The following table presents data for the two alternatives: A B C 1 Choice Upgrade Replace 2 One-time equipment costs $3,000,000 $4,800,000 3 Variable manufacturing cost per Pump $150 $70 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment Required 0 0 PLEASE ONLY ANSWER PART 2 Prepare a schedule, for the remaining 3 years, reflecting whether CP should upgrade its production line or replace it? Assume that the one-time equipment cost to replace the production equipment…
- Cari Pump (CP) Company is considering either upgrading or replacing its production equipment. The company produces and sells annually 7,000 pumps at a selling price of $850 each. The current production equipment, purchased for $1,850,000 and with a five-year useful life, is only two years old and is depreciated on a straight-line basis. Also, it has a terminal disposal value of $0 and a current disposal price of $500,000. The following table presents data for the two alternatives: A B C 1 Choice Upgrade Replace 2 One-time equipment costs $3,000,000 $4,800,000 3 Variable manufacturing cost per Pump $150 $70 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment Required 0 0 A, Prepare a schedule, for the remaining 3 years, reflecting whether CP should upgrade its production line or replace it? Assume that the one-time equipment cost to replace the production equipment is negotiable and all…Arvada Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 150,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 80,000 20,000 15,000 115,000 35,000 17,500 $ 17,500 Pretax income Income taxes (50%) Net income 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return…Cari Pump (CP) Company is considering either upgrading or replacing its production equipment. The company produces and sells annually 7,000 pumps at a selling price of $850 each. The current production equipment, purchased for $1,850,000 and with a five-year useful life, is only two years old and is depreciated on a straight-line basis. Also, it has a terminal disposal value of $0 and a current disposal price of $500,000. The following table presents data for the two alternatives: A B C 1 Choice Upgrade Replace 2 One-time equipment costs $3,000,000 $4,800,000 3 Variable manufacturing cost per Pump $150 $70 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment Required 0 0 Prepare a schedule, for the remaining 3 years, reflecting whether CP should upgrade its production line or replace it? Assume that the one-time equipment cost to replace the production equipment is negotiable and all other…