In: Accounting
Cori's Meats is looking at a new sausage system with an installed cost of $450,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $64,000. The sausage system will save the firm $240,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $23,000. If the tax rate is 21 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.).
In: Finance
A company wants to purchase a piece of equipment in three years that will cost $28,000 according to their best estimates. What amount do they need to invest now in a 6% interest bearing account to be able to make that purchase?
In: Finance
The spot price of oil is $50 per barrel and the cost of storing a barrel of oil for one year is $3, payable at the end of one year. The risk-free interest rate is 5% per annum with annual compounding. According to the one-year forward price on oil in the market, the convenience benefit of carrying a barrel of oil for one year is estimated to be $2 in terms of the value at the end of one year. This implies that the one-year forward price on oil is $__________ in the market.?
In: Finance
A company owns common stocks with a beta coefficient of 1.2. If the cost of equity is 13% and the expected market return is 11% what is the risk-free rate?
In: Finance
The JLK Corporation is considering an investment that will cost
RM80,000 and
have a useful life of 4 years. During the first 2 years, the net
incremental after-tax
cash flows are RM25,000 per year and for the last two years they
are RM20,000
per year. Calculate the payback period for this investment.
In: Finance
The Sausage Hut is looking at a new sausage system with an equipment cost of $450,000. This cost will be depreciated straight-line to zero over the project's 5-year life, at the end of which the sausage system can be sold at a salvage value of $80,000. The sausage system is estimated to generate $250,000 in annual sales, with COGS and administrative expenses of $72,000. The system requires an initial investment in net working capital of $30,000, which will be recouped at project end. If the tax rate is 35 percent and the required return is 10 percent, what is the NPV of this project?
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In: Finance
A borrower finds that the incremental cost of borrowing an extra $10,000 in a first mortgage loan is 14%. A second mortgage loan can be obtained at 15% in combination with a smaller (by $10,000) first mortgage. The borrower would be better off by borrowing with the combination of the smaller first mortgagee loan and a second mortgage loan for $10,000.
Group of answer choices
True
False
In: Finance
In: Finance
In: Finance