1) Find the NPV of a project that will involves an initial investment of $25,000, then another outlay of $10,000 after one year. It will give a cash flow of $6,000 annually for seven years, at the end of year 3 through year 9. The proper discount rate is 9%. Is it a profitable project?
2) Quincy Corporation is in the 30% income tax bracket. It needs a new computer costing $55,000, which will last for 5 years. Quincy uses straight-line basis depreciation. The computer will save the company $12,000 annually. The proper discount rate is 10%. Should Quincy buy the computer?
3) A machine has an expected life of 6 years. It costs $30,000 and increases the net income of the company by $7,000 annually. It has a salvage value of $5,000. The proper discount rate is 12% and the company pays no taxes at present. Would you recommend the purchase of this machine?
4) A machine will run for 3 years (probability .35) or 4 years (probability .65). The annual revenue from the machine, before taxes, is $12,000. The proper discount rate in this case is 14% and there are no taxes. The machine will cost $40,000. Should the firm buy the machine?
5) Hammond Corp. has an income tax rate of 32% and its after-tax discount rate is 9%. Hammond plans to buy a machine for $53,000 that will depreciate on a straight-line basis for 6 years with no salvage value. What is the minimum annual pretax income generated by this machine per year to justify its purchase?
6) Gore Corporation wants to buy a machine that will save it $2,000 before taxes per year. This machine will last for 5 years and Gore will depreciate it over that period with no resale value. The tax rate of Gore is 30% and its discount rate is 12%. Find the maximum price that Gore should pay for this machine.
7) Greenland Corporation needs a machine that costs $40,000. The company will depreciate it over 4 years using straight-line depreciation. The machine, however, has a useful life of 5 years during which it will generate $10,000 annually in pretax revenue. The cost of capital for Greenland is 11% and its income tax rate is 30%. Should Greenland buy the machine?
8) Allen Corp. is considering the purchase of a machine that costs $27,000 and is expected to run for 5 years and then resold for $2,000. The total available depreciation is thus $25,000. The yearly earnings before taxes from this machine are $6,000. The tax rate of Allen is 30% and its cost of capital is 12%. Should Allen buy the machine?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more