A company is thinking about replacing an old machine with a new one. The old machine cost $1.3 million. The new machine will cost $1.56 million. The new machine will be depreciated according to 5-year MACRS, and will be sold at $300,000 after 5 years. The new machine will require an investment of $150,000 in working capital, which can be recovered after 5 years. The old machine is being depreciated at a rate of $130,000 per year, and can be sold for $50,000 after 5 years. It can be sold for $300,000 now. The company is in a 30% tax bracket and applies a 12% discount rate. Should the company replace the old machine with the new one?
In: Finance
Workers place a value of a 2% decline in injuries sustained while on-the-job at $1500/year. To reduce worker injury rates by 2% would cost employers $300/year per worker. Without safety improvements, current companies offer a salary of $20,000/year. A new company enters the industry with an annual pay rate of $19,000 with the added bonus of reducing injuries by 2%. Given this information:
A. no workers would be willing to work at the new company.
B. the new company would not be able to compete with the existing companies.
C. workers would want to work at the new company.
D. only injury prone workers would want to work at the new company.
In: Economics
For the state of New Mexico and Colorado, I need the following questions answered please:
a) To what extent does New Mexico and Colorado follow the rulings of the Multistate Tax Commission?
b) Does New Mexico and Colorado adopt pertinent changes to the Internal Revenue Code? If so, as of what date?
c) Is the tax effectiveness of a passive investment company limited in some way? Has New Mexico and Colorado adopted the Geoffrey approach to the taxation of income from intangibles? Explain.
d) Does New Mexico and Colorado apply entity-level income taxes for S Corporations, partnerships, and LLCs? If so, what are the terms of those taxes?
Thank you.
In: Accounting
18. New Jet Airlines plans to issue 16-year bonds with a par value of $1,000 that will pay $40 every six months. The bonds have a market price of $1,340. Flotation costs on new debt will be 7%. If the firm has a 35% marginal tax bracket, what is cost of existing debt?
22. GHJ Inc. is investing in a new project of $16 million. It will raise $4 million of bonds, $4 million of preferred stock, and $8 million of new common stock. If the after-tax cost of debt is 6%, cost of preferred stock is 10%, the cost of retained earnings is 16%, and the cost of new common stock is 19%, what is the WACC?
In: Finance
An oil company is drilling a series of new wells on the perimeter of a producing oil field. About 17% of the new wells will be dry holes. Even if a new well strikes oil, there is still uncertainty about the amount of oil produced: 40% of new wells that strike oil produce only 2,200 barrels a day; 60% produce 6,200 barrels per day.
a. Forecast the annual cash revenues from a new perimeter well. Use a future oil price of $97 per barrel. (Use 365 days a year. Enter your answer in dollars not in millions and round your answer to the nearest whole dollar amount.)
Expected annual cash revenues $
In: Finance
2. Answer all parts (a), (b), and (c) of this question. (a) [10 marks] Define and explain the concepts of moral hazard and adverse selection. Illustrate each concept with two examples: one in the context of new technology sale, the other in the context of new technology funding. (b) [20 marks] Explain why asymmetric information may cause a market failure in the markets for selling new technology and the market for funding new technological development. (c) [20 marks] Propose and defend a solution to these market failures in each of the two markets (technology sale and new technological development funding). Point out any disadvantages as well as any advantages of your solution.
In: Economics
X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:
| Current equipment | |
| Current sales value | $10,000 |
| Final sales value | 5,000 |
| Operating costs | 62,000 |
| New equipment | |
| Purchase cost | $49,000 |
| Final sales value | 5,000 |
| Operating cost savings | 9,000 |
Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 4%, what is the net present value of replacing the current equipment?
In: Accounting
X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:
| Current equipment | |
| Current sales value | $10,000 |
| Final sales value | 6,500 |
| Operating costs | 67,000 |
| New equipment | |
| Purchase cost | $52,000 |
| Final sales value | 6,500 |
| Operating cost savings | 9,500 |
Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 6%, what is the net present value of replacing the current equipment?
In: Accounting
X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:
Current equipment
Current sales value $5,000
Final sales value 5,000
Operating costs 60,500
New equipment
Purchase cost $45,000
Final sales value 5,000
Operating costs 52,000
Maintenance work will be necessary on the new equipment in Year 4, costing $2,500. The current equipment will last for five more years; the life of the new equipment is also five years. Assuming a discount rate of 7%, what is the net present value of replacing the current equipment
In: Accounting
32. Which of these new product characteristics is LEAST likely to increase the adoption rate:
- product that can be demonstrated to outperform current products.
- product that costs less than presently used products.
- product that requires new patterns of use compared to existing products.
- product that can be tried or sampled in small quantities.
33. Test marketing:
- attempts to record consumers’ responses under reasonably realistic market conditions.
- is basically the same as the screening and development stages of the new product development process.
- is more common for industrial products than for consumer products because industrial markets usually involve fewer customers.
- should be done slowly so that competitive actions can be observed and categorized.
34. Which is WRONG with regard to new products and product innovation:
- most “new” products are just slight modifications of existing products.
- planned obsolescence can cause some consumers to delay their purchases in order to wait for product improvements.
- the most innovative new product ideas usually originate in research labs rather than in the marketplace.
- the most successful new product innovation programs are organized just for a particular purpose; they are not ongoing research programs.
36. Meghan was disappointed to be assigned to work on a product in the mature phase of the product life cycle. Once she started working with the product team, she discovered all the following EXCEPT:
- changes in consumers’ preferences were opening up new market segments.
- end-of-cycle strategies were the most profitable for companies.
- she could take the product into a new market segment to stimulate new growth.
- some simple product redesign could completely reinvigorate the product.
In: Operations Management