. Topsider Inc. is considering the purchase of a new
leather-cutting machine to replace an existing machine that has a
book value of $3,000 and can be sold for $1,500. The old machine is
being depreciated on a straight-line basis, and its estimated
salvage value 3 years from now is zero. The new machine will reduce
costs (before taxes) by $7,000 per year. The new machine has a
3-year life, it costs $14,000, and it can be sold for an expected
$2,000 at the end of the third year. The new machine would be
depreciated over its 3-year life using the MACRS method. Assuming a
40 percent tax rate and a required rate of return of 16 percent,
find the new machine's NPV.
A. -$2,822
B. $1,658
C. $4,560
D. $15,374
E. $9,821
In: Finance
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Southern Alliance Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 70 percent common stock, 15 percent preferred stock, and 15 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 7 percent, and for new debt, 2 percent. |
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What is the true initial cost figure the company should use when evaluating its project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) |
| Initial cost |
$ |
In: Finance
Please solve it the easy way.
Several drugs are used to treat diabetes. A sales specialist for
a leading pharmaceutical company needs an estimate of the number of
new prescriptions that were written during a particular month for
his company’s new diabetes drug. The numbers of new prescriptions
in a random sample of 25 sales districts are as follows:
210 240 190 275 290 185 223 190 185 192
265 312 284 261 243 168 240 170 187 190
215 240 210 235 290
1. Find a 90% confidence interval for the average number of new
prescriptions written for this new drug among all the sales
districts. State the assumptions.
2. Calculate the widths for 95% and 98% confidence intervals.
In: Statistics and Probability
King Fisher Aviation is considering an investment in a new technology for a drone project with a price of $16 million. Their current technology has a book value of $5 million and a market value of $5 million. The new technology is expected to have a five (5) year life, and the old technology has three (3) years left in which it can be expected to be used. If the firm replaces the old technology with the new technology it expects to save $5.7 million in operating costs each year over the next four years. If the firm purchases the new technology, it will also need an investment of $300,000 in net working capital. The required return on the investment is 12 percent, and the tax rate is 39 percent.
What are your recommendations on the investment project? Explain your reasoning?
What are your recommendations for investment in the new technology?
In: Finance
Return on Investment Michelle Gutierrez, manager of the Components Division of FX Corp, is considering a new investment for her division. Her division has an investment base of $4,000000 and operating income of $600,000. The new investment of $500,000 supports corporate strategy and is expected to increase operating income by $50,000 next year, an acceptable level of return from a corporate headquarters point of view.
a.) What is the current return on investment (ROI) for the components division?
Answer:
b.) What will the (ROI) be if Michelle undertakes the new investment?
Answer:
c.) Suppose Michelle’s compensation consists of a salary plus a bonus proportional to her divisions ROI. Is Michelle’s new compensation higher with or without the new investment?
Answer:
d.) Suggest changes to FX Corporation’s management that will better align performance evaluation and compensation with corporate goals.
In: Accounting
NOTE: Follow all the steps in hypothesis testing. You can use Graphpad for this one.
(c)What do you mean by saying that this is the confidence interval in this case? (0.5 point)
In: Statistics and Probability
Marion Dexter Company is evaluating a proposal to purchase a new machine that would cost $100,000 and have a salvage value of $10,000 in four years. It would provide annual operating cash savings of $10,000, as follows:
Old Machine New Machine
Salaries $ 40,000 $ 36,000
Supplies 7,000 5,000
Maintenance 9,000 5,000
Total $56,000 $46,000
If the new machine is purchased, the old machine will be sold for its current salvage value of $20,000. If the new machine is not purchased, the old machine will be disposed of in four years at a predicted salvage value of $2,000. The old machine's present book value is $40,000. If kept, in one year the old machine will require repairs predicted
to cost $35,000. Marion Dexter's cost of capital is 14
percent.
Required:
Should the new machine be purchased? Why or why not?
In: Accounting
An automotive manufacturer wants to know the proportion of new car buyers who prefer foreign cars over domestic.
Step 1 of 2:
Suppose a sample of 1046 new car buyers is drawn. Of those sampled, 355 preferred foreign over domestic cars. Using the data, estimate the proportion of new car buyers who prefer foreign cars. Enter your answer as a fraction or a decimal number rounded to three decimal places.
Step 2 of 2:
Suppose a sample of 1046 new car buyers is drawn. Of those sampled, 355 preferred foreign over domestic cars. Using the data, construct the 85% confidence interval for the population proportion of new car buyers who prefer foreign cars over domestic cars. Round your answers to three decimal places.
In: Math
A company is considering an 8-year project to expand into a new
geographical area. The project requires a new machine, which would
cost $230,000 FOB San Francisco, with a shipping cost of $8,000 to
the new plant location. Installation expenses of $13,000 would also
be required. This new machine would be classified as 7-year
property for MACRS depreciation purposes. The project engineers
anticipate that this equipment could be sold for salvage for
$40,000 at the end of theproject. If the corporate tax rate is 31%,
what is the after tax salvage cash flow for this new machine at the
end of the project? (Answer to the nearest dollar.)
MACRS percentages for depreciation each year are as follows:
Year %
1 14.29 2 24.49 3 17.49 4 12.49 5 8.93 6 8.93 7 8.93 8 4.45
In: Finance
) A researcher recruited 2100 men in his research and followed up every year for 4 years to find out the incidence rate of respiratory disease.
After 1 year, there was not a new diagnosis of respiratory disease, and 100 lost to follow up,
After 2 years, found one new case of respiratory disease and 99 lost to follow up,
After 3 years, found 7 new cases of respiratory diseases and seven hundred ninety three lost to follow up.
After 4 years, found eight new cases of respiratory diseases and three hundred ninety two lost to follow up.
Calculate the incidence rate of respiratory disease
(**new cases of respiratory disease and men lost to follow up were disease-free for six months) ** and contribute ½ years to the denominator)
In: Math