Power Manufacturing has equipment that it purchased 6 years ago for $2,900,000. The equipment was used for a project that was intended to last for 8 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $470,000 today. The company's tax rate is 21 percent. What is the aftertax salvage value of the equipment? Multiple Choice $513,350 $383,300
Q: Mary Smith is interested in buying the stock of Blossom, Inc., which is increasing its dividends at…
A: Solution:Dividend Discount Model (DDM) is the equity model which calculates the current value of…
Q: An investment project costs $15,600 and has annual cash flows of $3,900 for six years. a. What is…
A: YearsCash flows0($15,600)1$3,9002$3,9003$3,9004$3,9005$3,9006$3,900Required:a) Discounted Payback @…
Q: Suppose that you could invest in the following projects but have only $29,680 to invest. How would…
A: NPV is the most important and commonly used method of selection of project based on time value of…
Q: A firm has target debt-equity ratio of 0.60. The flotation cost for equity is 5% and the flotation…
A: Weighted average cost of capital:The weighted average cost of capital (WACC) is a financial metric…
Q: Excellent Yachting is considering acquiring Turquoise Tours. Management believes Turquoise Tours can…
A: Present value is a current value of future value which is received in near future at specified…
Q: Your firm is contemplating the purchase of a new $435,000 computer-based order entry system. The…
A: Internal rate of return(IRR) is the discount rate that equates the NPV of an investment opportunity…
Q: A firm evaluates all of its projects by applying the IRR rule. Year 0 1 2 . 3 Cash Flow -$ 149,000…
A: IRR is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for…
A: Value per share refers to the price that is willing by the investors in the market to buy the shares…
Q: The stock of Business Adventures sells for $100 per share. Its likely dividend payout and end-of…
A: The rate of return is a measure of the gain or loss made on an investment relative to the amount of…
Q: MetaYou have accumulated $8,000 toward the down payment on a piece of lake front property in rural…
A: The rate of return is a measure that indicates the performance of the investment for the respective…
Q: An index consists of the following securities. What is the value-weighted index return?…
A: Here, StockOutstanding SharesBeginning PriceEnding PriceL4000 $ 18.00 $…
Q: True or False: The following statement accurately describes how firms make decisions related to…
A: When company requires funds, it will use retained earnings present in the company. If they are not…
Q: TIPS Interest and Par Value A 4.00 percent TIPS has an original reference CPI of 171.0. If the…
A: Interest rate = 4%Original reference CPI = 171Current CPI = 206.3Original Par value = $1,000
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: IRR stands for Internal Rate of Return, which is a financial metric used to evaluate the…
Q: The YTM on a bond is the interest rate you earn on your investment if interest rates don't change.…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: A company signed a 9%, 10-year note for $166,000. The company paid an installment of $2,700 for the…
A: Loan Installment is that amount which is paid by borrower to lender on monthly basis. It includes…
Q: Consider this project with an internal rate of return of 28.7%. The following are the cash flows of…
A: NPV means Net Present value.It is a capital budgeting technique used for making investment…
Q: (a) Aside from the trade-off between tax benefits and financial distress costs, a company taking on…
A: The trade-off theory in finance refers to the concept that a company's capital structure decisions…
Q: Sayers Corporation is going to pay an annual dividend of $2.10 per share next year. This year, the…
A: The dividend discount model states that value of a stock now is the present value of all its future…
Q: Last year, Terrific Copying had total revenue of $455695, while operating at 61% of capacity. The…
A: Breakeven point is the point of sales where it is determined how much the fixed cost is required to…
Q: Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of…
A: When the firm procures funds from various financing sources in such cases the weights assigned to…
Q: Suppose you are the money manager of a $4.48 million investment fund. The fund consists of four…
A: CAPM refers to the relationship between the expected return of the stock and the risk associated…
Q: Barry's Steroids Company has $1,000 par value bonds outstanding at 16 percent interest. The bonds…
A: Coupon Bond:A coupon bond is a type of debt security that pays interest periodically in the form of…
Q: 10. Bond listings and yield spreads The following bond list is from the business section of a…
A: The price of a bond is equal to the present value of coupon payments and the face value of the bond.…
Q: onsider a firm that distributes the entire annual earnings to its shareholders through dividends…
A: Price of a bond is the present value of dividends and growth in dividends and the present value of…
Q: Suppose that you buy a two-year 8% bond at its face value. (a) What will be your total nominal…
A: Nominal return refers to the rate of return on investment without adjustment for inflation.For the…
Q: You've just invested $770,000 into Far Far Away Investments. This company promises to pay you and…
A: The annual payment you can expect to receive from your $770,000 investment in Far Far Away…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: Here, YearCash Flows0-28000015680027500031230004113000572200Required Return11%
Q: Future Value Present Value Table Factor Interest Rate 96
A: Present Value (PV) is a financial concept that pertains to the valuation of future cash flows in…
Q: Use the following information to calculate the expected return and standard deviation of a portfolio…
A: Portfolio return is calculated by weighted average return of the stocks.Portfolio Return Rp = Wa*Ra…
Q: Morgan Company's last dividend (Do) was $1.00. Its dividend growth rate is expected to be constant…
A: Current price of stock is the price which can be paid for purchase of the stock. It is also called…
Q: You deposit $1,000 in an account earning 9.3% interest compounded daily . How much will you have in…
A: Future value refers to the monetary value of an investment at a specified future date. It is the…
Q: iRobot has total sales of $380.000, costs are $270,000, and depreciation is $30,000. The tax rate is…
A: Sales$380,000Cost$270,000Depreciation$30,000Tax 25%Required:Operating Cash flow =?
Q: Falwell Motors is issuing 20-year, 4.5% callable bonds. These bonds are callable in 6 years with a…
A: Solution:-Yield to call refers to the rate of return earned by the holder if the bond is held till…
Q: A 30-year mortgage requires payments of $2,850.28 at the end of each month. If interest is 5.39%…
A: Compound = Monthly = 12Time = t = 30 * 12 = 360Payment = p = $2850.28Interest Rate = r = 5.39 / 12 %
Q: ART has come out with a new and improved product. As a result, the firm projects an ROE of 27%…
A: Value of stock can be found based on the dividend discount model as the present value of dividend…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: The Sharpe ratio is a widely accepted technique for assessing an investment's attractiveness. It…
Q: You're trying to determine whether or not to expand your business by building a new manufacturing…
A: Average accounting return is to be calculated by taking average earnings after deducting all the…
Q: A stock has an expected return of 0.11, its bets is 0.82, and the risk-free rate is 0.04. What must…
A: Capital asset pricing model is used to compute the expected return from a stock:The expected rate of…
Q: Leon wants to save a classic car so he deposits $1500 at the end of the years into a savings account…
A: We need to use future value of ordinary annuity formula to calculate worth of deposit after 5 years.…
Q: Builtrite stock is currently selling for $40 and recently paid a dividend of $1.50. The stock has a…
A: Here,CurrentDividend (D0) is $1.50Curremt Market Price (P0) is $40Growth Rate (g) is 12%
Q: The level of the Syldavian market index is 21,600 at the start of the year and 26,100 at the end.…
A: Market index refers to the portfolio which is used to represent the performance of the stocks in the…
Q: A company has a 12% WACC and is considering two mutually exclusive investments (that camnot ·be…
A: The IRR Rule aids businesses in making project decisions.According to the IRR rule, if the IRR is…
Q: One of your customers has a delinquent accounts payable balance. You've mutually agreed to a…
A: Loans are paid by equal monthly payments that carry the payment for interest and payment for loan…
Q: Gary King, a professional athlete, currently has a contract that will pay him a large amount in the…
A: Present Value is the current price of future value which will be received in near future at some…
Q: "Calculate the price of a 4.62% coupon bond that matures in 20 years if the market interest rate is…
A: The price of a bond is equal to the sum of the present value of coupon payments and the present…
Q: Bellinger Industies is considering two projects. for inclusion in its capital budget, and you Both…
A: Solution:Excel formula:Payback period = Prior period + (Cashflow of prior period / Cashflow of later…
Q: Weston Hotels pays no dividend at the present time. Starting in Year 3, the firm will pay a dividend…
A: Dividend in year 1=$0Dividend in year 2=$0Dividend in year 3=$0.35Dividend in year 4=$0.35Dividend…
Q: A project has the following cash flows: Year Cash Flows -$ 128,200 0 1 49,400 2 63,800 51,600 28,…
A: Profitability Index is computed as follows:-Profitability Index =
Q: A stock just paid a dividend of $1.89. The dividend is expected to grow at 28.89% for five years and…
A: Current price of stock is the price which can be paid for purchase of the stock. It is also called…
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- 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?Power Manufacturing has equipment that it purchased 6 years ago for $2,500,000. The equipment was used for a project that was intended to last for 8 years and was being depreciated over the life of the project. However, due to low demand, the project is being shut down. The equipment was depreciated using the straightline method and can be sold for $390,000 today. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment?Power Manufacturing has equipment that it purchased 6 years ago for $2,500,000. The equipment was used for a project that was intended to last for 8 years and was being depreciated over the life of the project. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $390,000 today. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment? Multiple Choice $307,750 $526,500 $431,125 $472,250 $390,000
- Power Manufacturing has equipment that it purchased 7 years ago for $2,350,000. The equipment was used for a project that was intended to last for 9 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $360,000 today. The company's tax rate is 21 percent. What is the aftertax salvage value of the equipment? Multiple Choice $486,000 $303,222 $394,067 $360,000 О $388,389Pioneer Imports has equipment that it purchased 5 years ago for $2,650,000. The equipment was used for a project that was intended to last for 7 years. However, due to low demand, the project is being shut down two years earlier than planned. The equipment was depreciated using the straight-line method and can be sold for $420,000 today. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment?Martin Tartans Inc. is considering the purchase of a new argyle sock knitting machine to replace a less automated one. The new machine will cost $220,000 plus $30,000 for shipping and installation. The machine being replaced was purchased five years ago for $140,000 and depreciated as a 7-year MACRS property. It can be sold for $24,000. Martin has a marginal tax rate of 35%. Compute the NINV for the project. Use the rounded MACRS schedule listed below: (7-Year Depreciation Schedule: 14%, 25%, 18%, 12%, 9%, 9%, 9%, 4%)
- Martin D. Martian Inc. is considering the purchase of a new argyle sock knitting machine to replace a less automated one. The new machine will cost $250,000 plus $30,000 for shipping and $16,000 installation. The machine being replaced was purchased five years ago for $180,000 and depreciated as a 7-year MACRS property. It can be sold for $64,000. Martin has a marginal tax rate of 40%. Compute the NINV for the project. Use the rounded MACRS schedule listed below: (7-Year Depreciation Schedule: 14%, 25%, 18%, 12%, 9%, 9%, 9%, 4%)A project has to sell a machine that is obsolete. The market department finds a buyer who is willing to pay $100, 000 for the machine. The machine was purchased 4 years ago for $1.1 million. The accounting department notes that the depreciation method for this machine is straight line, and the machine will be depreciated to zero over a five - year time period after purchase. What is the machine's after - tax salvage value? Tax rate is 21%. Question 1 options: $1, 635.24 $2, 314.05 $142, 000.00 $2,784.62 - $289.26Power Manufacturing has equipment that it purchased 5 years ago for $1,850,000. The equipment was used for a project that was intended to last for 7 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $265,000 today. The company's tax rate is 34 percent. What is the aftertax salvage value of the equipment? O O $354,614 $175,386 $309,807 $355,100 $265,000
- Acorporation purchased a machine for $60,000 five years ago. It had an estimated life of 10 years and an estimated salvage value of $9,000. The current BV of this machine is $34,500. If the current MV of the machine is$40,500 and the effective income tax rate is 29%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Solve, (a) $28,755 (b) $40,500 (c) $38,760 (d) $37,455 (e) $36,759Startle Corporation wants to purchase a new production machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $65,000 (book value is $73,000). The new machine will cost $600,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $50,000 will be required if the new machine is purchased. The investment is expected to generate $75,000 in before tax cash net inflows during the first year of operation. The expected before tax cash net inflow for years two through five is $220,000 each year. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at…The Golden Corporation is considering selling one of its old assembly machines. The machine, purchased for $30,000 3 years ago, had an expected life of 6 years and an expected salvage value of zero. Assume Evans uses simplified straight-line depreciation and could sell this machine for $8,000. Also assume Evans has a 34 percent marginal tax rate. What would be the taxes associated with this sale?