5. Sam would like to buy Rupert Fishing Company, an existing business which has been in Prince Rupert for 25 years. Sam must buy a fishing boat to run the business. Boat cost $ 14 million and it will take 2 year to get it constructed and delivered to Prince Rupert. Vendor has agreed Sam to pay 50% of the boat cost at the end of year 1 and 50% on delivery. Expected useful life of the boat is 11 years from the date of delivery. Price of salmon per lIb is

5. Sam would like to buy Rupert Fishing Company, an existing business which has been in Prince Rupert for 25 years. Sam must buy a fishing boat to run the business. Boat cost $ 14 million and it will take 2 year to get it constructed and delivered to Prince Rupert. Vendor has agreed Sam to pay 50% of the boat cost at the end of year 1 and 50% on delivery. Expected useful life of the boat is 11 years from the date of delivery. Price of salmon per lIb is

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Yummy Food is expanding its business and wants to open a new facility to make frozen lasagna, which requires a new automated lasagna maker. A lasagna maker can be purchased for $350,000 or leased under a finance lease over 7 years, with lease payments to be made at the beginning of each year. If the company purchases the lasagna maker, it can be fully depreciated to zero using the straight-line method over seven years. The management expects the scrap/residual value of the lasagna maker to be $60,000 at the end of the lease. After a detailed analysis of the project, Yummy Food determines the appropriate after-tax cost of capital of the project to be 15% per annum. Yummy Food pays a corporate tax rate of 28% and it can borrow funds at a before-tax interest rate of 5% per annum. All cash-flows have been quoted on a before-tax basis. Given this information, what is the lease payment (per annum) that would make Yummy Food indifferent between leasing and borrow-to-buy the machine? (Using…
Raiders Restaurant is considering the purchase of a $10,000,000 flat-top grill. The grill has an economic life of 6 years and will be fully depreciated using the straight-line method. The grill is expected to produce 600,000 tacos per year for the next 6 years, each taco costing $4 to make and priced at $11. Assume the discount rate is 12% and the tax rate is 21%. The restaurant expects the market value of the grill to be $0, 6 years from now. Calculate the book value of the grill at the end of year 3. (Round to 2 decimals)
Ronald McDonald decides to install a fuel storage system for his farm that will save him an estimated 6.5 cents/gallon on his fuel cost. He uses an estimated 20,000 gallons/year on his farm. Initial cost of the system is $10,000, and the annual maintenance the first year is $25, increasing by $25 each year thereafter. After a period of 10 years the estimated salvage is $3000. If money is worth 12%, is the new system a wise investment?
Raiders Restaurant is considering the purchase of a $10,000,000 flat - top grill. The grill has an economic life of 6 years and will be fully depreciated using the straight-line method. The grill is expected to produce 600,000 tacos per year for the next 6 years, each taco costing $4 to make and priced at $11. Assume the discount rate is 12% and the tax rate is 21 %. The restaurant expects the market value of the grill to be $0, 6 years from now. Calculate the net present value for the project.
Two plans are available for a company to obtain automobiles for its salesmen. How many miles must the cars be driven each year for the two plans to have the same costs? Use an interest rate of 10%. Plan A: Lease the cars and pay $0.28 per mile. Plan B: Purchase the cars for $6000 and economic life of three years, after which it can be sold for $1999. Gas and oil cost $0.05 per mile. Insurance is $500 per year
Oliver Douglas decides to install a fuel storage system for his farm that will save him an estimated 6.5 cents/gallon on his fuel cost. Initial cost of the system is $10,000, and the annual maintenance is $25 the first year, increasing by $25 each year thereafter. After a period of 10 years the estimated salvage is $3000. If money is worth 12%, what is the breakeven quantity of fuel?
Hardev
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then sold for $10,000 at the end of its useful life. Lollie has presented Kiddy with the following options: 1. Buy machine. The machine could be purchased for $160,000 in cash. All maintenance and insurance costs, which approximate $5,000 per year, would be paid by Kiddy. 2. Lease machine. The machine could be leased for a 10-year period for an annual lease payment of $25,000 with the first payment due immediately. All maintenance and insurance costs will be paid for by the Lollie Corp. and the machine will revert back to Lollie at the end of the 10-year period. Required: Assuming that a 12% interest rate properly reflects the time value of money in this situation and that all maintenance and insurance costs are paid at the end of each year, determine which option Kiddy should choose. Ignore…
Raiders Restaurant is considering the purchase of a $10,000,000 flat-top grill. The grill has an economic life of 6 years and will be fully depreciated using the straight-line method. The grill is expected to produce 600,000 tacos per year for the next 6 years, each taco costing $4 to make and priced at $11. Assume the discount rate is 12% and the tax rate is 21%. The restaurant expects the market value of the grill to be $0, 6 years from now. Calculate the initial cash outflow for the grill (e.g. the time 0 cash flow). (Enter a negative value and round to 2 decimals)
Your client, Albert Jackson Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Jackson has an investment cost of $427,700 in the machine, which has a useful life of 25 years and no salvage value at the end of that time. Your client is interested in earning an 10% return on its investment and has agreed to accept 25 equal rental payments at the end of each of the next 25 years. Click here to view factor tables. You are requested to provide Jackson with the amount of each of the 25 rental payments that will yield an 10% return on investment. (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, e.g. 458,581) Amount of each rental payments
Mike Mulligan wants to expand his heavy equipment business into excavation. He plans to buy a used excavator for $300,000. The excavator requires an inventory of spare parts worth $ 10,000. These investments will occur immediately. Mulligan will operate the excavation business for two years and expects EBITDA of $200,000 at the end of each year. He will close his business at the end of the second year, sell the equipment for $100,000 and liquidate the inventory of spare parts. Mulligan pays a tax rate of 25%. Using this information, compute the appropriate values for operating cash flow, investments in net working capital, CAPEX and free cash flow for each year of the project.
Charlie's Hamburgers is considering adding pizza to its menu. The pizza require purchasing cooking equipment on sale for $55,000. The asset has a 6-year life, will produce a cash flow of $17,600 in the first year, $19,000 in the second year, $20, 250 in the third year, $21,750 in the fourth year, 22, 500 in the fifth year, and $23,000 in the sixth year. The cost of capital is 10%. What is the project's Internal Rate of Return (IRR)? Net Present Value (NPV)? and Profitability Index (PI)?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS