Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. the firm has a pretax cost of debt of 5.64% and a cost of equity of 11.29%. The debt-equity ratio is .61 and the tax rate is 39 percent.
A. Should the Firm accept the project?
B.Calculate the Firms WACC
In: Finance
A firm and its supplier are going to negotiate a deal. Since the supplier’s cost is $10 million per quarter and the value to the firm is $14 million per quarter, there is $4 million per quarter to split between the two. However, they can each hire a negotiation consultant for $500,000 per negotiation. If neither hires the consultant, each expects to get half of the $4 million pot. If only one hires the consultant, it expects to get three-fourths of the pot minus the consultant costs. If they both hire consultants, they cancel each other out and they expect to get half the pot minus the consulting costs. What is the equilibrium of this simultaneous move game?
In: Economics
A common method of controlling the cost of legal services is to refrain from consulting a lawyer until a serious legal problem absolutely requires it. Another approach is to hire or retain lawyers on an ongoing basis to provide advice as business decisions are made. Which approach is the most expensive? What should a business consider in making that choice?
In: Economics
At 110 units of output, marginal revenue is $6, the marginal cost is $6, and the average cost is $5. If consumers demand 110 units of output when the price is $9, what is the expected profit?
In: Economics
Which of the following is true?
The higher the cost associated with deposit outflows, the fewer excess reserves banks will want to hold.
One of the least costly ways for a bank to meet withdrawals if it runs short of funds, is to sell loans.
If a bank has sufficient excess reserves, deposit withdrawals will require no other changes in its balance sheet.
An increase in excess reserves reduces liquidity risk and raises a bank's return on its assets.
In: Economics
An Organization buys a machine for $25,000. The annual cost of maintaining the machine is $500 per year for the first 5 years (End of Year 1 thru End of Year 5) and then it increases to $750 for the next 5 years (Year 6 thru Year 10). Consider all cash flows to be end of year cash flows. For an interest rate of 8% per year compounded yearly, find the annual maintenance cost of the machine and the present worth of the total cost
In: Economics
In: Economics
The marginal cost of capital is determined by all of the following EXCEPT,
(a) corporate profit rate
(b) rate of depreciation
(c) interest rate
(d) price of capital and its rate of change
Firms find it profitable to add to their capital stock if,
(a) real cost of capital exceeds the marginal product of capital.
(b) marginal product of capital exceeds the real cost of capital.
(c) marginal product of capital exceeds the real interest rate.
(d) rental price of capital exceeds the marginal product of capital.
10. When the inflation rate is positive
i) Nominal GDP grows more than real GDP
ii) Nominal GDP grows less than real GDP
iii) Nominal GDP grows as much as real GDP
In: Economics
The initial cost of a machine is $2,400. The machine provides an annual revenue of $750. The salvage value of the machine is $50. If the machine has a life span of 5 years, what is the rate of return on this machine? Is the machine worth purchasing if the minimum attractive rate of return (MARR) is 18% per year?
In: Economics
what is responsible for cost and risk in FCA incoterm until which point of delivery ?
In: Economics