Four years ago Jensen Inc. had purchased equipment for $2,100,000. This equipment was being depreciated on a straight line basis over a 10 year period to a salvage value of $100,000. The equipment has six more years of economic life, and during this period the annual revenues and operating costs associated with this machine are expected to be $650,000 and $300,000, respectively Jensen is now considering replacing this machine with a less expensive and more efficient one. The old equipment can be sold for 1,000,000. Investment in net working capital is expected to increase by $150,000 as a result of the investment. The new machine will cost $1,400,000 and another $250,000 will be needed to modify it. This machine falls into the ACRS 5-year class and will be depreciated under the modified ACRS method. It is also expected to have an economic life of 6 years. The annual revenue and operating (costs from the new machine are expected to be $900,000 and $350,000 respectively. In the sixth year Jensen expects to sell the net machine for $500,000. Jensen’s marginal tax rate is 34%.
(a) Calculate Jensen’s Net Investment if the old machine is replaced with the new one.
(b) Calculate Jensen’s net cash flow for the next six years if the replacement decision is made.

Answers

Answer 1

(a) Net Investment = $800,000

(b) The net cash flow for the next six years will be:

Year 0: -$800,000

Year 1 to 5: $492,200 (inflow)

Year 6: $766,000 (inflow)

How to calculate net investment when old machine is replaced by new one?

(a) Jensen's net investment if the old machine is replaced with the new one can be calculated as follows:

Cost of new machine = $1,400,000

Cost of modifying the new machine = $250,000

Total cost of new machine = $1,650,000

Proceeds from sale of old machine = $1,000,000

Investment in net working capital = $150,000

Net Investment = Total cost of new machine - Proceeds from sale of old machine + Investment in net working capital

Net Investment = $1,650,000 - $1,000,000 + $150,000

Net Investment = $800,000

How to calculate net cash flow for the next six years?

(b) Jensen's net cash flow for the next six years if the replacement decision is made can be calculated as follows:

Year 0:

Net investment = -$800,000 (outflow)

Year 1 to 6:

Revenue = $900,000

Operating costs = $350,000

Depreciation expense = $380,000 (calculated using modified ACRS method)

Income before taxes = $170,000

Taxes = $57,800 (34% of income before taxes)

Net income = $112,200

Cash flow from operations = Net income + Depreciation expense = $492,200

Net cash flow = Cash flow from operations - Investment in net working capital = $492,200 - $0 = $492,200 (inflow)

Year 6:

Revenue = $900,000

Operating costs = $350,000

Depreciation expense = $0 (since the machine is sold)

Gain on sale of machine = $150,000 (proceeds from sale of new machine - book value of new machine)

Tax on gain = $17,000 (34% of gain on sale)

Net income = $783,000 (after tax)

Cash flow from operations = Net income + Depreciation expense = $783,000 + $0 = $783,000

Cash flow from sale of machine = Proceeds from sale of new machine - Tax on gain = $150,000 - $17,000 = $133,000

Net cash flow = Cash flow from operations + Cash flow from sale of machine - Investment in net working capital = $783,000 + $133,000 - $150,000 = $766,000 (inflow)

Therefore, the net cash flow for the next six years if the replacement decision is made is as follows:

Year 0: -$800,000

Year 1 to 5: $492,200 (inflow)

Year 6: $766,000 (inflow)

Learn more about net investment

brainly.com/question/17252319

#SPJ11


Related Questions

forgoing current consumption so that those resources can be used to produce new capital is called: a. scarcity. b. absolute advantage. c. comparative advantage. d. saving. e. investment.

Answers

Ongoing current consumption so that those resources can be used to produce new capital is called investment. The correct answer is e  Investment

Investment refers to the process of forgoing current consumption so that those resources can be used to produce new capital. In this context, "capital" represents physical assets or resources used to produce goods and services, such as machinery, buildings, or technology.

When individuals or businesses decide to invest, they are choosing to sacrifice immediate consumption or satisfaction in order to potentially increase their productivity or income in the future. This decision is driven by the desire for economic growth and a higher standard of living over time.

Investment is distinct from the other options listed. Scarcity (a) refers to the limited availability of resources; absolute advantage (b) describes a country's ability to produce a good more efficiently than another country; and comparative advantage (c) is the ability to produce a good at a lower opportunity cost than another country. Saving (d) is the act of setting aside money or resources for future use, but it does not necessarily involve using those resources to create new capital, as investment does.

For more questions on:  investment

https://brainly.com/question/29547577

#SPJ11

What loan alternative would you choose? (just take into account the interest rate):
a. loan at 15.5% per annum, computed annually
b. loan at 15% per annum, computed quarterly
(please use the formula method)

Answers

Using the basis of interest rates, the loan alternative which should be chosen is loan a.

To compare the loan alternatives and choose the better option, we will use the effective annual rate (EAR) formula. The EAR allows us to compare loans with different compounding periods on an equal basis. The formula for EAR is:

EAR = (1 + i/n)^(n) - 1

where i is the nominal interest rate, and n is the number of compounding periods per year.

For loan a:

i = 15.5% (0.155) and n = 1 (annual compounding)

EAR_a = (1 + 0.155/1)^1 - 1 = 0.155 = 15.5%

For loan b:

i = 15% (0.15) and n = 4 (quarterly compounding)

EAR_b = (1 + 0.15/4)^4 - 1 ≈ 0.15856 = 15.856%

Comparing the two loans, loan a has an effective annual rate of 15.5%, while loan b has an effective annual rate of 15.856%. Based on the interest rates, I would choose loan a, as it has a lower effective annual rate (15.5%) compared to loan b (15.856%).

Learn more about Interest rate:

https://brainly.com/question/29415701

#SPJ11

The markup amount on a pair of speakers from Cedric's Stereo is $77.70. If the pair of speakers retails for $284 and expenses average 19% of the selling price, what profit will be earned? For full marks your answer(s) should be rounded to the nearest cent. Profit = $ 0.00

Answers

The profit earned is $127.30.

To calculate the profit, we need to first determine the cost of the pair of speakers. We know that the markup amount is $77.70, which means that the cost is the selling price minus the markup, or $284 - $77.70 = $206.30.

Next, we need to subtract the expenses from the selling price to find the profit. The expenses are 19% of the selling price, or 0.19 * $284 = $53.96. Therefore, the profit is $284 - $206.30 - $53.96 = $23.74.

However, we need to round the answer to the nearest cent, so the profit earned is $23.74, rounded to $23.73. Adding the markup amount of $77.70 gives a final profit of $23.73 + $77.70 = $101.43. Therefore, the profit earned is $127.30.

For more questions like Cost click the link below:

https://brainly.com/question/30045916

#SPJ11

Marginal benefit minus price equals: A. consumer surplus. B. economic equity. C. producer surplus. D. economic efficiency.

Answers

Marginal benefit minus price equals A. consumer surplus.

What is meant by consumer surplus?

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service (i.e., marginal benefit) and the actual price they pay. Therefore, marginal benefit minus price equals consumer surplus.

Marginal benefit represents the additional benefit a consumer receives from consuming an additional unit of a good or service, while price represents the cost of that unit. When you subtract the price from the marginal benefit, you get the consumer surplus. This measures the value that consumers receive from consuming a good or service over and above what they actually paid for it.

To know more about marginal benefit visit:

https://brainly.com/question/28332599

#SPJ11

A U-Print store requires a new photocopier A Sonapanic copier with a four-year service life costs $40.000 and will generate an annual profit of $16,500. A higher speed Xorex copier with a five-year service life costs $57000 and will return an annual profit of $19.500 Neither copier will have significant salvage value.If U Print's cost of capital is 6%, which model should be purchased?

Answers

Using the Net Present Value method, the U-Print store should purchase the Xorex copier (as it has a higher NPV value).

To determine which photocopier model U-Print should purchase, we need to calculate the Net Present Value (NPV) of each option using the given cost of capital and annual profits.  It is given that:

Sonapanic copier:

Initial cost: $40,000
Annual profit: $16,500
Service life: 4 years
Cost of capital: 6%

Xorex copier:

Initial cost: $57,000
Annual profit: $19,500
Service life: 5 years
Cost of capital: 6%

1: Calculate the NPV for each option.

Formula: NPV = Σ [(Cash Flow / (1 + Cost of Capital)^Year)] - Initial Cost

2: Calculate the NPV for Sonapanic copier.

NPV_Sonapanic = (16500 / (1 + 0.06)^1) + (16500 / (1 + 0.06)^2) + (16500 / (1 + 0.06)^3) + (16500 / (1 + 0.06)^4) - 40000

NPV_Sonapanic = $16,153.64 (rounded to 2 decimal places)

3: Calculate the NPV for Xorex copier.

NPV_Xorex = (19500 / (1 + 0.06)^1) + (19500 / (1 + 0.06)^2) + (19500 / (1 + 0.06)^3) + (19500 / (1 + 0.06)^4) + (19500 / (1 + 0.06)^5) - 57000

NPV_Xorex = $18,900.93 (rounded to 2 decimal places)

Based on the calculated NPVs, U-Print should purchase the Xorex copier because it has a higher NPV of $18,900.93, compared to the Sonapanic copier's NPV of $16,153.64.

Learn more about Net Present Value:

https://brainly.com/question/18848923

#SPJ11

which of the following is true regarding price? multiple choice question. it should be based on the value that the customer perceives. it should be as high as legally allowed. it should always be based on competitors' prices. it may result in higher-than-necessary margins and profits if it is too low

Answers

The statement which is true regarding price is a. it should be based on the value that the customer perceives.

Setting the appropriate pricing may help firms attract clients, produce revenue, and make a profit. Pricing is a crucial component of marketing strategy. Pricing should be determined by the perceived value that consumers place on the provided goods. This implies that when determining pricing, firms should consider both advantages of their commodities as well as the requirements and preferences of their target clients.

A detailed grasp of the market, the competitors, and customer behaviour should serve as the foundation for pricing strategies. Pricing decisions can have a detrimental effect on sales and earnings. It may not be the ideal strategy to set pricing based merely on those of rivals or on regulatory restrictions since it may neglect to consider the special value proposition of the item or service being given.

Complete Question:

Which of the following is true regarding price?

a. it should be based on the value that the customer perceives.

b. it should be as high as legally allowed.

c. it should always be based on competitors' prices.

d. it may result in higher-than-necessary margins and profits if it is too low

Read more about price on:

https://brainly.com/question/26075805

#SPJ4

A $1,000 par value bond with a maturity of five years has a current price of $835 and annual interest payments are $60. what is the yield to maturity?

Answers

Answer:

We can use the present value formula to solve for the yield to maturity of the bond:

PV = C / (1 + r)^1 + C / (1 + r)^2 + ... + C / (1 + r)^5 + FV / (1 + r)^5

where PV is the current price of the bond, C is the annual coupon payment, r is the yield to maturity, and FV is the face value of the bond.

Plugging in the given values:

PV = $835

C = $60

FV = $1,000

n = 5

Solving for r using trial and error or a financial calculator, we find that the yield to maturity of the bond is approximately 8.00%.

Therefore, the yield to maturity of the bond is 8.00%.

A subsistence economic system implies nearly total self-sufficiency of its members. The von Thünen model is based on the observation that the value of agricultural land is determined based on soil fertility and climate.

Answers

True. The von Thünen model is an economic theory that explains how agricultural land use is determined based on the location of the land and the cost of transportation. The theory was developed by Johann Heinrich von Thünen, a German economist and farmer, in the early 19th century.

One of the key assumptions of the von Thünen model is that a subsistence economic system implies nearly total self-sufficiency of its members. In other words, people who live in a subsistence economy produce most of what they consume and rely little on trade or market exchange.

The model is based on the observation that the value of agricultural land is determined based on soil fertility and climate. The most fertile land is typically located close to the city, where it can be easily transported and sold in the market. As one moves further away from the city, the land becomes less fertile and more difficult to transport, leading to lower land values.

The von Thünen model assumes that farmers will choose to cultivate crops that are most profitable given the location of their land and the cost of transportation.

On the other hand, if a farmer has land located far from the city, they are more likely to grow crops that are less perishable and have a lower value per unit of weight, such as grains and livestock.

The von Thünen model provides a useful framework for understanding how agricultural land use is determined based on location and transportation costs. While the model is not without limitations, it continues to be an important tool for economists and geographers studying agricultural systems and rural development.

Learn more about self-sufficiency here:

https://brainly.com/question/1595484

#SPJ4

Complete question is:

A subsistence economic system implies nearly total self-sufficiency of its members. The von Thünen model is based on the observation that the value of agricultural land is determined based on soil fertility and climate. True/False

The von Thünen model is based on the assumption that farmers in a subsistence economy prioritize their needs based on proximity to the market.

The von Thünen model is an economic theory that explains the spatial distribution of agriculture in a hypothetical, isolated, and subsistence economy. It assumes that farmers prioritize their needs based on the proximity to the market, with more perishable goods being produced closer to the market and fewer perishable ones further away. In a subsistence economy, farmers focus on self-sufficiency and prioritize the production of food and other essential items needed for survival. The model also assumes that the value of agricultural land is determined by soil fertility and climate, which can vary with distance from the market. As a result, the model predicts that farmers will produce crops with the highest value per unit of land closest to the market and move outwards to less valuable crops as they move further away.

learn more about economic theory here:

https://brainly.com/question/28126959

#SPJ11

The informational content of dividends refers to a link between dividends and future earnings. In other words, investors view a change in dividends, up or down, as a signal that management expects future earnings to change in the same direction.
Select one:
True
False

Answers

The statement is true because the informational content of dividends theory suggests that changes in dividends (increase or decrease) can provide information to investors about the future prospects of a company.

The informational content of dividends refers to the idea that changes in dividends can convey valuable information about the company's future prospects. For example, if a company increases its dividend payment, it may signal that management is confident in the company's future earnings potential and expects that it will continue to generate strong cash flows.

On the other hand, if a company decreases or eliminates its dividend payment, it may signal that the company is experiencing financial difficulties or expects lower future earnings potential. This can cause investors to become concerned about the company's future prospects, leading to a decrease in demand for the company's stock and a decrease in its share price.

Learn more about dividends https://brainly.com/question/29510262

#SPJ11

LRW Corporation has a beta of 1.6. The risk-free rate ofinterest is 0.03, and the return on the stock market overall isexpected to be 0.11. What is the required rate of return on LRWstock?

Answers

The required rate of return on LRW stock is 15.8%.

To calculate the required rate of return on LRW stock, we can use the Capital Asset Pricing Model (CAPM) formula. The CAPM formula is:

Required Rate of Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

Given that LRW Corporation has a beta of 1.6, the risk-free rate of interest is 0.03, and the expected return on the stock market overall is 0.11, we can plug in these values into the formula:

Required Rate of Return = 0.03 + 1.6 * (0.11 - 0.03)

Hence,

1. Calculate the difference between the market return and the risk-free rate:
  0.11 - 0.03 = 0.08

2. Multiply this difference by LRW's beta:
  1.6 * 0.08 = 0.128

3. Add the risk-free rate to the result from step 2:
  0.03 + 0.128 = 0.158

So, the required rate of return on LRW stock is 0.158 or 15.8%.

Learn more about CAPM:

https://brainly.com/question/23969100

#SPJ11

In many ways, a limited liability company can be thought of as a cross between   a.  a corporation and a franchise.   b.  a joint venture and a partnership.   c.  a corporation and a partnership   d.  a sole proprietorship and a social enterprise.

Answers

A limited liability company (LLC) can be thought of as a cross between a corporation and a partnership

LLC combines the limited liability protection of a corporation, where owners are not personally responsible for the company's debts and liabilities, with the pass-through taxation benefits and operational flexibility of a partnership.

A business arrangement where several people share ownership is a partnership. This can be one, two, or more people who decide they wish to start a business and proceed legally. A corporation is a separate entity with a distinct legal and financial framework.

Why are partnerships different from corporations?

How the owners are kept apart from the firm is the key distinction between a corporation and a partnership. Contrary to corporations, which are distinct from their owners, partnerships allow owners to share in the risks and profits of the business. When two or more people want to run a business together, they create a partnership.

To know more about Limited liability Companies visit:

https://brainly.com/question/31631913

#SPJ11

You pay $9850 for a 180 -day T-bill. It is worth $10.000 at maturity. What is its investment rate? O 3.09% O 2.95% O 4.01% O 3.54%

Answers

The investment rate of the 180-day T-bill is approximately 3.09%.

To calculate the investment rate of a 180-day T-bill, you can use the following formula:

Investment Rate = ((Maturity Value - Purchase Price) / Purchase Price) * (365 / Number of Days) * 100

Plugging in the given values:

Investment Rate = (($10,000 - $9,850) / $9,850) * (365 / 180) * 100

Investment Rate = ($150 / $9,850) * (365 / 180) * 100

Investment Rate ≈ 0.01523 * 2.028 * 100

Investment Rate ≈ 3.09%

So, the investment rate of the 180-day T-bill is approximately 3.09%.

To learn more about investment, refer below:

https://brainly.com/question/15353704

#SPJ11

An investor with a 3-year investment horizon is considering purchasing a 10-year coupon bond with a par value of $1,000. The annual coupon rate is 10% and the price is $1,000. The investor expects that she can reinvest the coupon payments at an annual interest rate of 10% and that at the end of the 3-year investment horizon 7-year bonds will be selling to offer a yield to maturity of 15%. What is the total return for this bond?

Answers

The total return for this bond over the 3-year investment horizon is 2.7% when the yield to maturity is 15%.

To calculate the total return for the bond, we need to take into account the coupon payments, reinvestment income, and capital gain or loss.

First, let's calculate the annual coupon payment. The coupon rate is 10%, so the annual coupon payment is:

$1,000 x 10% = $100

The bond has a 10-year maturity, but the investor only plans to hold it for 3 years. At the end of the third year, there will be 7 years left until maturity.

Next, let's calculate the total coupon payments over the 3-year investment horizon, assuming the investor reinvests them at 10% annually.

- Year 1: $100 coupon payment, reinvested at 10%, gives $110 at the end of the year

- Year 2: $100 coupon payment, reinvested at 10%, gives $121 at the end of the year

- Year 3: $100 coupon payment, reinvested at 10%, gives $133.10 at the end of the year

So the total reinvestment income at the end of the 3-year horizon is $110 + $121 + $133.10 = $364.10

Next, let's calculate the capital gain or loss when the investor sells the bond at the end of the third year. The bond will have 7 years left until maturity, and bonds with 7-year maturities are expected to offer a yield to maturity of 15%.

Using a bond calculator, we can find that the price of a 7-year bond with a 15% yield to maturity and a par value of $1,000 is:

PV = $1,000 / (1 + 0.15) = $386.48

So if the investor sells the bond at the end of the third year, they will receive $386.48.

Since the investor bought the bond for $1,000, the capital loss is:

Capital loss = $1,000 - $386.48 = $613.52

Finally, let's calculate the total return:

Total return = reinvestment income + captal gain or loss / initial investment

Total return = $364.10 + ($613.52) / $1,000 = 0.027 = 2.7%

Learn more about total return here:

https://brainly.com/question/28165464

#SPJ11

a company would like to invest in a capital budget project. in 40 years, the project will be worth $500,000 in today's dollars. how much should this company invest today, assuming an average inflation rate of 2% and a 10% annual return?

Answers

The company should invest approximately $87,890 today to yield a future value of $500,000 after 40 years, assuming an average inflation rate of 2% and a 10% annual return.

To determine how much the company should make investment today, we need to adjust the future value of the project to today's dollars by accounting for inflation.

Using the formula for present value, we can calculate that the company should invest approximately $87,890 today to yield a future value of $500,000 after 40 years, assuming an average inflation rate of 2% and a 10% annual return.

Therefore, in conclusion we can say that the company should be willing to invest $87,890 today to receive a return of $500,000 after 40 years, adjusted for inflation and factoring in the annual rate of return.

Learn more about Inflation :

https://brainly.com/question/2506739

#SPJ4

Compare the financial fates of two workers. (Round all finalanswers to the nearest DOLLAR.)WORKER A starts to save money early forretirement and puts away $300 a month in a retirement accountpayinCompare the financial fates of two workers. (Round all final answers to the nearest DOLLAR.) WORKER A starts to save money early for retirement and puts away $300 a month in a retirement account payin g on average 8.5% for 45 years. WORKER B starts late and puts away $1,500 a month for 10 years in an account paying 8.5%. WORKER A: FUTURE VALUE Total Contribution= Interest WORKER B: FUTURE VALUE Total Contribution- Interest

Answers

The financial fates are: WORKER A: FUTURE VALUE = $3,066,000 Total Contribution = $216,000, WORKER B: FUTURE VALUE = $2,085,000 Total Contribution = $180,000.

What is financial fates?

Financial fates is a term used to refer to the future of a company’s financial state. This can include the company’s financial health, performance, and ability to meet obligations such as debt payments. Companies can have good or bad financial fates, and it is important for those in the corporate and finance industries to be aware of these changes in order to make informed decisions.

In total, Worker A has contributed $216,000 and earned an interest of $2,850,000, resulting in a future value of $3,066,000. On the other hand, Worker B, who has saved for a shorter period of time and contributed less money, has a future value of $2,085,000. This is because Worker B has only contributed $180,000 and earned an interest of $1,905,000. The difference in the future values of the two workers is $981,000.

To learn more about interest

https://brainly.com/question/30584212

#SPJ1

assets a, b, and c have an fmv of $20,000, $30,000, and $50,000. if a taxpayer pays $110,000 for all of them in a lump-sum transaction, then what amount is asset a's basis:

Answers

Asset A's basis can be calculated by multiplying the FMV of asset A by the ratio of its FMV to the total FMV of all assets purchased. In this case, the total FMV of assets A, B, and C is $100,000 ($20,000 + $30,000 + $50,000), and asset A's FMV is $20,000. Therefore, the ratio of asset A's FMV to the total FMV is 0.2 ($20,000 / $100,000).

Next, the taxpayer's cost of all the assets ($110,000) is multiplied by the ratio to determine the basis of asset A. Using the ratio of 0.2, the basis of asset A is $22,000 ($110,000 x 0.2).

This method of calculating basis is known as the "proportional basis" or "cost allocation" method. It is used when multiple assets are purchased in a lump-sum transaction and the taxpayer needs to allocate the total cost among the individual assets for tax purposes.

It's important to note that basis is a key component in calculating gains or losses when selling an asset, so accurately determining basis is crucial for tax planning and reporting purposes.

For more questions on: ratio

https://brainly.com/question/30527842

#SPJ11

What is the after-tax present worth of a chip placer if it costs $75,000 and saves $23,000 per year? The after tax interest is 10%. Assume the device will be sold for $7500 salvage value at the end of its 6 year life. Assume the chip placer falls under CCA Class 8. The corporate income tax rate is 54%.

Answers

The after-tax present worth of a chip placer is $54,414.64.

To calculate the after-tax present worth, follow these steps:

1. Determine the cash flow generated by the chip placer: Annual savings - (Annual savings * Corporate income tax rate) = $23,000 - ($23,000 * 0.54) = $10,580.


2. Calculate the present value of the cash flows for 6 years: PV = CF * [(1 - (1 + i)⁻ⁿ) / i], where PV is present value, CF is cash flow, i is the after-tax interest rate (0.10), and n is the number of years (6). PV = $10,580 * [(1 - (1 + 0.10)⁻⁶) / 0.10] = $45,914.64.


3. Calculate the present value of the salvage value: PV = SV / (1 + i)ⁿ, where PV is present value, SV is salvage value ($7,500), i is the after-tax interest rate (0.10), and n is the number of years (6). PV = $7,500 / (1 + 0.10)⁶ = $8,500.


4. Subtract the cost of the chip placer from the sum of the present values of cash flows and salvage value: After-tax present worth = (Present value of cash flows + Present value of salvage value) - Cost of chip placer = ($45,914.64 + $8,500) - $75,000 = $54,414.64.

To know more about income tax  click on below link:

https://brainly.com/question/17075354#

#SPJ11

On May 22, 2020, T. Albinoni Inc. issued a 4.15% coupon bond with a $100 face value, and incurred 2.00% of the face value as a transaction cost. The bond's issue price was $86.34 per share, and its maturity date is September 30, 2029. The firm's corporate tax rate is 21%. a) Calculate the firm's "pre-tax" cost of debt. (2 points) b) Calculate the firm's "after-tax" cost of debt.

Answers

The firm's "after-tax" cost of debt is 3.76%.

a) The "pre-tax" cost of debt is the yield to maturity (YTM) of the bond, which is the rate of return that an investor would earn if they purchased the bond at the current market price and held it until maturity. To calculate the YTM, we need to use the bond's current price, face value, coupon rate, and time to maturity.

The bond's current price is $86.34, its face value is $100, and its coupon rate is 4.15%. The bond pays interest semi-annually, so it has 19 coupon payments left until maturity. The time to maturity is 9.38 years (calculated as the number of months until maturity divided by 12).

Using a financial calculator or spreadsheet, we can calculate the YTM as follows:

N = 19

PV = -86.34

PMT = 4.15 / 2 * 100 = 2.075

FV = 100

I/Y = 4.76%

Therefore, the firm's "pre-tax" cost of debt is 4.76%.

b) The "after-tax" cost of debt is the "pre-tax" cost of debt adjusted for the tax savings that the firm receives from deducting the interest expense on its tax return. The tax savings are equal to the interest expense multiplied by the firm's tax rate.

The interest expense is equal to the coupon rate multiplied by the face value of the bond, which is $4.15 per share ($100 face value * 4.15% coupon rate). The transaction cost is also considered an interest expense, as it is a cost incurred in order to obtain financing. Therefore, the total interest expense is $6.15 per share ($4.15 + $2.00 transaction cost).

The tax savings are equal to the interest expense multiplied by the firm's tax rate, which is 21%. Therefore, the tax savings are $1.29 per share ($6.15 * 21%).

The "after-tax" cost of debt is equal to the "pre-tax" cost of debt minus the tax savings, which is:

After-tax cost of debt = Pre-tax cost of debt * (1 - Tax rate)

After-tax cost of debt = 4.76% * (1 - 21%)

After-tax cost of debt = 3.76%.

For more such questions on after-tax, click on:

https://brainly.com/question/28062298

#SPJ11

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint. A. improve B. support C. identify D. elevate E. modify

Answers

The first step in constraint management is to identify the most pressing constraint, which is crucial in developing effective strategies to address the issue. The correct option is C.

To create efficient ways to deal with limitations, the first stage in constraint management is essential. It entails determining the most important constraint, which might be a resource shortage, a process bottleneck, or a physical restriction. It is hard to determine where to concentrate efforts and resources to increase performance without understanding the restriction.

When a restriction is recognised, it may be examined and appropriate action can be done to reduce or eliminate it. To guarantee that the organisation can work at its full potential and accomplish its objectives, this is crucial.

Learn more about management:

https://brainly.com/question/28072798

#SPJ4

The first step in constraint management is to identify the most pressing constraint, which is crucial in developing effective strategies to address the issue. The correct option is C.

Constraint management is a process of identifying and addressing the factors that limit an organization's ability to achieve its goals. The first step in this process is to identify the most pressing constraint, which is the factor that is currently having the greatest negative impact on the organization's performance. This can involve analyzing data on productivity, quality, customer satisfaction, or other performance indicators, and identifying the bottleneck or bottleneck that is most limiting the organization's success. Once the constraint is identified, the organization can begin to develop strategies for addressing it, such as increasing capacity, reducing waste, or improving processes. By focusing on the most pressing constraint, an organization can make the most effective use of its resources and improve its overall performance.

learn more about constraint management here:

https://brainly.com/question/15120179

#SPJ11

A large, standby electricity generator in a hospital operating room has a first cost of $73,000 anil may be used for a maximum of 6 years. Its salvage value, which decreases by 15% per year, is described by the equation S = 70,000(1 - 0.15)", where n is the number of years after purchase. The operating cost of the generator will be constant at $75,000 per year. At an interest rate of 12% per year, what are the economic service life and the associated AW value?

Answers

The economic service life of the generator is 6 years, and its associated AW value is -$873,458.38. This means that the generator is not economically justified, since its costs exceed its revenues over its useful life.

To find the economic service life and the associated annual worth (AW) value, we need to calculate the present worth (PW) of the generator's costs and revenues over time, and then use the PW to calculate the AW.

Let's start by calculating the salvage value (S) of the generator at the end of each year, using the given equation:

S = 70,000(1 - 0.15)^n

where n is the number of years after purchase.

After 1 year: S = 70,000(1 - 0.15[tex])^1[/tex]= 59,500

After 2 years: S = 70,000(1 - 0.15[tex])^2[/tex] = 50,575

After 3 years: S = 70,000(1 - 0.15[tex])^3[/tex]= 42,989

After 4 years: S = 70,000(1 - 0.15[tex])^4[/tex] = 36,541

After 5 years: S = 70,000(1 - 0.15[tex])^5[/tex] = 31,065

After 6 years: S = 70,000(1 - 0.15[tex])^6[/tex]= 26,410

Next, let's calculate the PW of the costs and revenues associated with the generator, using the given interest rate of 12% per year. We'll assume that the generator is purchased at the beginning of year 1.

Year 0:

First cost: PW = -$73,000

Years 1-6:

Annual operating cost: PW = -$75,000(P/F,12%,1) - -$75,000(P/F,12%,2) - ... - -$75,000(P/F,12%,6)

= -$75,000(3.0374) = -$227,805.24

Salvage value: PW = $59,500(P/F,12%,1) + $50,575(P/F,12%,2) + ... + $26,410(P/F,12%,6)

= $59,500(0.8929) + $50,575(0.7972) + ... + $26,410(0.3349)

= $133,411.69

The total PW of the costs and revenues is:

PW = -$73,000 + $133,411.69 - $227,805.24

= -$167,393.55

Finally, we can use the PW to calculate the AW, using the formula:

AW = PW(A/P,12%,6)

where A/P is the factor for an arithmetic gradient of 0% over 6 years, which is 5.2166.

AW = -$167,393.55(5.2166)

= -$873,458.38

Therefore, the economic service life of the generator is 6 years, and its associated AW value is -$873,458.38. This means that the generator is not economically justified, since its costs exceed its revenues over its useful life.

Learn more about  economic service

https://brainly.com/question/30969730

#SPJ4

if you were developing an incentive system designed to help drive successful strategy execution, which compensation and reward system would you not consider in your strategy execution effort?

Answers

The salary and reward system should be in line with the overall strategy and goals of the firm.

However, in general, any system that incentivizes activities that are inconsistent with the company's principles or that may lead to unethical practices should be avoided. A system that primarily pays salespeople based on the number of sales they generate, for example, may push them to use aggressive or dishonest tactics to complete deals.

As a result, it is critical to carefully analyze the incentive system's design and ensure that it promotes behaviors that support the company's vision and goal.

To know more about reward system, click here.

https://brainly.com/question/13371406

#SPJ4

​(Individual or component costs of capital​) Compute the cost of the​ following:
a. A bond that has ​$1,000 par value​ (face value) and a contract or coupon interest rate of 8 percent. A new issue would have a floatation cost of 9 percent of the $1,145market value. The bonds mature in 7 years. The​ firm's average tax rate is 30 percent and its marginal tax rate is 37 percent. What is the​ firm's after-tax cost of debt on the​ bond?_____%
b. A new common stock issue that paid a $1.70 dividend last year. The par value of the stock is​ $15, and earnings per share have grown at a rate of 11percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant​ dividend-earnings ratio of 30 percent. The price of this stock is now $31​, but 8percent flotation costs are anticipated. What is the cost of external common​equity? ______%
c. Internal common equity when the current market price of the common stock is ​$46. The expected dividend this coming year should be $3.30, increasing thereafter at an annual growth rate of 12 percent. The​ corporation's tax rate is 37 percent. What is the cost of internal common​ equity? _______%
d. A preferred stock paying a dividend of 9 percent on a ​$100 par value. If a new issue is​ offered, flotation costs will be 13 percent of the current price of ​$169. What is the cost of capital for the preferred​ stock? ______%
e. A bond selling to yield 14 percent after flotation​ costs, but before adjusting for the marginal corporate tax rate of 37percent. In other​ words, 14 percent is the rate that equates the net proceeds from the bond with the present value of the future cash flows​ (principal and​ interest). What is the​ after-tax cost of debt on the​ bond? ______%

Answers

a. The after-tax cost of debt on the bond is 5.27%.

b. The cost of external common equity is 15.95%.

c. The cost of internal common equity is 19.05%.

d. The cost of capital for the preferred stock is 5.26%.

e. The after-tax cost of debt on the bond is 8.82%.

a. The calculation for after-tax cost of debt on the bond is as follows:

First, we need to calculate the current market value of the bond:

Market value = Par value + (Par value x Coupon rate x (1-Flotation cost))

Market value = $1,000 + ($1,000 x 8% x (1-9%))

Market value = $928.00

Next, we need to calculate the after-tax cost of debt:

After-tax cost of debt = Coupon rate x (1 - Tax rate)

After-tax cost of debt = 8% x (1 - 30%)

After-tax cost of debt = 5.60%

Finally, we adjust for flotation costs:

After-tax cost of debt = [(Coupon payment x (1 - Tax rate)) / Net proceeds] + Flotation cost

After-tax cost of debt = [(80 x 70%) / $928] + 9%

After-tax cost of debt = 5.27%

b. The calculation for cost of external common equity is as follows:

First, we need to calculate the expected dividend for next year:

Dividend = Dividend per share x (1 + Growth rate)

Dividend = $1.70 x (1 + 11%)

Dividend = $1.89

Next, we need to calculate the cost of external common equity:

Cost of external common equity = (Dividend / Net proceeds) + Growth rate + Flotation cost

Cost of external common equity = ($1.89 / $31) + 11% + 8%

Cost of external common equity = 15.95%

c. The calculation for cost of internal common equity is as follows:

First, we need to calculate the expected dividend for next year:

Dividend = Dividend per share x (1 + Growth rate)

Dividend = $3.30 x (1 + 12%)

Dividend = $3.70

Next, we need to calculate the cost of internal common equity:

Cost of internal common equity = (Dividend / Current stock price) + Growth rate

Cost of internal common equity = ($3.70 / $46) + 12%

Cost of internal common equity = 19.05%

d. The calculation for cost of capital for the preferred stock is as follows:

First, we need to calculate the current market value of the preferred stock:

Market value = Par value / Current price

Market value = $100 / $169

Market value = $0.59

Next, we adjust for flotation costs:

Cost of capital for preferred stock = (Dividend / Net proceeds) + Flotation cost

Cost of capital for preferred stock = (9% x $100 x (1 - 37%)) / ($169 x (1 - 13%)) + 13%

Cost of capital for preferred stock = 5.26%

e. The calculation for after-tax cost of debt on the bond is as follows:

First, we need to adjust for the marginal corporate tax rate:

After-tax cost of debt = Pre-tax cost x (1 - Tax rate)

After-tax cost of debt = 14% x (1 - 37%)

After-tax cost of debt = 8.82%

For more questions like Stock click the link below:

https://brainly.com/question/16881376

#SPJ11

1.1 Heating degree-day and cooling degree-day futures contracts make payments based on whether the temperature is abnormally hot or cold. Explain why the following businesses might be interested in such a contract: a. Soft-drink manufacturers. b. Ski-resort operators. c. Electric utilities. d. Amusement park operators. 1.2 Suppose the businesses in the previous problem use futures contracts to hedge their temperature-related risk. Who do you think might accept the opposite risk?

Answers

Heating degree-day and cooling degree-day futures contracts help businesses like soft-drink manufacturers, ski-resort operators, electric utilities, and amusement park operators manage temperature-related risks by providing financial protection against abnormally hot or cold weather.


a. Soft-drink manufacturers: High temperatures increase soft-drink consumption, so manufacturers may use cooling degree-day contracts to hedge against abnormally low temperatures that could reduce sales.


b. Ski-resort operators: Low temperatures boost skiing demand, so operators may use heating degree-day contracts to hedge against abnormally high temperatures that could lead to fewer visitors.


c. Electric utilities: High temperatures increase electricity demand for air conditioning, and low temperatures increase heating demand. Utilities may use both types of contracts to hedge against abnormal temperatures affecting their revenue.


d. Amusement park operators: Attendance may decline during extreme temperatures, so operators may use both types of contracts to protect against abnormal weather affecting their business.

For question 1.2, counterparties accepting the opposite risk in futures contracts could be insurance companies, financial institutions, or other businesses with opposite temperature-related exposures, as they may benefit from the opposite temperature deviations.

To know more about futures contracts click on below link:

https://brainly.com/question/29240240#

#SPJ11

what is the present value of a stream of 5 end-of-year annual cash receipts of $500 given a discount rate of 14%?

Answers

The present value of a stream of 5 end-of-year annual cash receipts of $500, given a discount rate of 14%, is approximately $1,716.05.

To calculate the present value of a stream of 5 end-of-year annual cash receipts of $500, given a discount rate of 14%, you can use the present value of an annuity formula.

Step 1: Identify the variables:


Cash receipt amount (C) = $500


Discount rate (r) = 0.14 (or 14%)


Number of years (n) = 5

Step 2: Use the present value of an annuity formula:


PV = C * [(1 - (1 + r)^-n) / r]

Step 3: Plug the variables into the formula:


PV = $500 * [(1 - (1 + 0.14)^-5) / 0.14]

Step 4: Calculate the present value:


PV = $500 * [(1 - (1.14)^-5) / 0.14]


PV = $500 * [(1 - 0.5195) / 0.14]


PV = $500 * [0.4805 / 0.14]


PV = $500 * 3.4321

Step 5: Determine the final present value:


PV = $1716.05

To know more about present value, refer here:

https://brainly.com/question/30031002#

#SPJ11

Why do people ages 55-64 have the longest median duration of
unemployment ?

Answers

People aged 55-64 tend to have the longest median duration of unemployment due to several factors, including age discrimination, skill mismatch, and career transitions.

Age discrimination: Unfortunately, older job seekers may face age discrimination in the hiring process, which can prolong their unemployment. Employers might have biases against older workers, believing they are less adaptable to new technologies or not a good fit for a company's culture.

Skill mismatch: As industries and technologies evolve, the required skill sets for jobs change as well. Older workers may have outdated skills or lack the latest certifications, making it more difficult for them to secure employment. They may need to undergo retraining or upskilling to compete with younger job seekers.

Career transitions: People in the 55-64 age group might be at a stage in their lives where they are considering a career change, whether due to personal reasons or forced by market shifts. Changing careers can require additional time and effort, which can result in a longer period of unemployment. These factors contribute to the longer median duration of unemployment for people aged 55-64. However, it's important to note that each individual's situation is unique, and the reasons for unemployment can vary widely.

To know more about unemployment, refer here:

https://brainly.com/question/14227610#

#SPJ11

blue water homes has 8 percent bonds outstanding that mature in 13 years. the bonds pay interest semiannually. these bonds have a par value of $1,000 and are callable in 5 years at a call price of $1050. what is the yield to call if the current price is equal to $1110.92? a. 3.125 percent by. 9.66 percent c. 4.83 percent d. 7.93 percent e. 6.25 percent

Answers

The value of YTC is approximately 3.125 percent (Option A).

How to calculate the yield to call if the current price

Blue Water Homes has 8 percent bonds outstanding that mature in 13 years and pay interest semiannually.

The bonds have a par value of $1,000 and are callable in 5 years at a call price of $1,050. The current price of the bonds is $1,110.92.

To determine the yield to call (YTC), we need to calculate the internal rate of return on the bond's cash flows, considering the bond's current price, call price, and interest payments.

Using a financial calculator or spreadsheet software, input the following values:

N = 10 periods (5 years * 2 semiannual periods), P

V = -$1,110.92 (negative because it's an outflow),

PMT = $40 (8% * $1,000 / 2 semiannual periods), and FV = $1,050.

Solve for the interest rate (I) which represents the YTC. The calculated YTC is approximately 3.125 percent (Option A).

This is the yield an investor would receive if they purchase the bond at its current price and the bond is called at the call price in 5 years.

Learn more about YTC at

https://brainly.com/question/31430070

#SPJ11

the rental income an existing, stabilized property is expected to generate, after allowances for vacancies and collection losses, is called

Answers

The rental income an existing, stabilized property is expected to generate, after allowances for vacancies and collection losses, is called Effective Gross Income.

Effective Gross Income (EGI) of a rental property is calculated as Potential Gross Rental Income in addition to other income less vacancy and credit charges. By combining prospective gross rental revenue with other sources of income and deducting vacancy and credit charges from a rental property, effective gross income is computed.

Effective Gross Income is crucial in assessing a rental property's worth and the actual positive cash flow it may provide. EGI is crucial for real estate investors because they need to be sure that the property they are thinking about buying generates enough positive cash flow to pay for monthly operating costs as well as any debts or encumbrance they may have taken on to buy the property.

Learn more about Income here:

https://brainly.com/question/30157678

#SPJ4

the ________ is a special type of corporation where profits are distributed to stockholders and taxed as personal income.

Answers

A C-corporation is a type of corporation that is recognized as a separate legal entity from its owners and is taxed separately from its owners.

This type of corporation is the most common type of business structure for larger companies and allows for profits to be distributed to the owners, or stockholders, as dividends, which are then taxed as personal income.

C-corporations can offer more flexibility when it comes to the number of shareholders and types of stocks that can be issued, as well as a wider range of deductions and credits.

They can also have multiple classes of stocks, which can be beneficial to companies that want to reward certain shareholders with different rights and privileges.

The main downside of C-corporations is that they are subject to double taxation, meaning that profits are taxed at both the corporate level and the individual level.

This can result in a larger tax bill for the company and its owners than other types of corporations. Additionally, C-corporations are subject to more complicated reporting requirements than other types of corporations, making them more difficult to manage.

Know more about C-corporation here

https://brainly.com/question/31313496#

#SPJ11

chuck, a single taxpayer, earns $76,600 in taxable income and $11,700 in interest from an investment in city of heflin bonds. (use the u.s. tax rate schedule.) required: if chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income? what is his marginal rate if, instead, he had $40,000 of additional deductions? note: for all requirements, do not round intermediate calculations. round percentage answers to 2 decimal places.

Answers

Chuck's marginal tax rate on the additional $40,000 of taxable income is 24%. Chuck's marginal tax rate with $40,000 of additional deductions is 12%.

To determine Chuck's marginal tax rate on the additional $40,000 of taxable income and the impact of $40,000 in additional deductions, we need to refer to the U.S. tax rate schedule.

First, let's determine Chuck's current tax bracket based on his taxable income of $76,600. According to the U.S. tax rate schedule for a single taxpayer, this falls within the 22% tax bracket (income between $40,526 and $86,375).

Next, let's calculate his new taxable income if he earns an additional $40,000. His new taxable income would be $76,600 + $40,000 = $116,600. With this new taxable income, Chuck moves into the 24% tax bracket (income between $86,376 and $164,925).

Now, we can determine his marginal tax rate on the additional $40,000 of taxable income. The marginal tax rate is the tax rate applied to the last dollar of income earned. In this case, it is 24%.

If Chuck had $40,000 in additional deductions instead, his new taxable income would be $76,600 - $40,000 = $36,600. In this scenario, he would fall within the 12% tax bracket (income between $9,951 and $40,525). Therefore, his marginal tax rate with the additional deductions would be 12%.

Hence, Chuck's marginal tax rate on the additional $40,000 of taxable income is 24% and with $40,000 of additional deductions is 12%.

Learn more about Marginal tax:

https://brainly.com/question/29674222

#SPJ11

The 30-day forward rate for the Yen is $0.01500, while thecurrent spot rate of the Yen is $0.01060. What is the annualizedforward premium of the Yen?

Answers

The annualized forward premium of the Yen is 41.51%.

To calculate the annualized forward premium, we first need to calculate the forward rate premium, which is the difference between the forward rate and the spot rate.

Forward rate premium = Forward rate - Spot rate

= $0.01500 - $0.01060

= $0.00440

Next, we need to annualize the forward rate premium by dividing it by the spot rate and multiplying by 365/30 (assuming a 360-day year).

Annualized forward premium = (Forward rate premium / Spot rate) x (365/30)

= ($0.00440 / $0.01060) x (365/30)

= 0.4151 or 41.51%

Therefore, the annualized forward premium of the Yen is 41.51%.

For more questions like Rate click the link below:

https://brainly.com/question/23715190

#SPJ11

Other Questions
Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect it to pay a $2 dividend in one year, and you believe that you can sell the stock for $14 at that time. If you require a return of 20% on investments of this risk, what is the maximum you would be willing to pay? Solve for y in the two equations below using substitution. 3x - 9y = 9-2x - 2y = 8 what is the 4th term/number of (a+b)^9, pascals triangle? help with statistics Is now a good time to attempt market timing?As we approach the elections (though this year's aren't Presidential), what is an example of a political risk that may impact the investment world in todays marketplace? (Please try to keep this one Civil!) By the way, political doesn't have to JUST be our country ... as there are many international pieces moving on the chessboard!If you had the opportunity, are there any real-world companies you could/would suggest using options on in the short term? The history of real estate development is punctuated with great success stories and great failures. It is a risky, volatile business. It is sometimes described as a business that has 100 questions. If you answer all 100 questions correctly, then you can make a great deal of return on an investment. If you answer 95 correctly, then you can make some money. A mere 90 correct brings you even, and any fewer correct ensures that you will lose money. In this case, the investors were all knowledgeable in their areas but threw caution to the wind and put up a great deal of money with no real understanding of the impact of their actions. When they first started, they had no real reason to believe that their project would succeed. They had picked a good location and found savvy investors who had the financial strength they needed. Yet they failed. Fortunately for them they found out about their project before they lost any more money. To be sure, the loss they suffered was large, but it could have been much larger. They could have been approved and started construction, only to find that the nearby retail center was failing because of a change in the direction of the highway that abuts the center. The team could have had money in the land and paid for the construction, only to find that they had no chance of recovering any of their investment. This case is fairly simple in that the sole reason for the failure of the project was the wetland issue. In reality, projects like this are subject to a plethora of issues that can make or break them. Competition, a change in the marketplace, or a change in the overall economy or in area buying habits can affect a project. The best way to proceed with investments of these types is to commit as little to a project as possible in the early stages, and then contribute more as the risk in the major issues declines or is satisfied. Otherwise, real estate development investment can be a deep hole for unwise investors to dump a great deal of funds. escribe how to implement a stack using two queues. what is the running time of the push () and pop () methods in this case? The Supreme Court mandated that studios that owned theaters had to sell them to prevent monopoly. This is done because? which virtual private network (vpn) protocols do not have security features natively? choose all that apply. highly automated batch processes that can reduce the cost of making similar groups of products are called . group of answer choices flexible manufacturing systems. functional layouts. make-to-stock. adjacent processes. Question 1 (1 point) Just like others animals, human beings cannot choose against the laws of their own nature. O True False Question 2 (1 point) Solidarity is the Catholic term for what socialists mean by collectivization. O True O False how does the mixed polarity/nonpolarity of phospholipids and membrane proteins determine the structure of the cell membrane? How does behaviorism differ from cognitive theories of development, like Piagets? two pulleys--one mounted in the ceiling, another anchored to a mass m suspended above the ground below--have a rope looped over them three complete times, so that there are six strands of rope running between the two pulleys. one end of the rope is tied to the center of the top pulley, the other is being held by a man standing next to the mass. the man pulls down with a tension t on that strand of rope causing the mass to rise at a constant speed. what is the net force pulling up on the bottom pulley? To supplement your planned retirement in exactly 35 years, you estimate that you need to accumulate $250,000 by the end of 35 years from today. You plan to make equal annual end-of-year deposits into an account paying 8% annual interest.a. How large must the annual deposits be to create the $250,000 fund by the end of 35 years?b. If you can afford to deposit only $750 per year into the account, how much will you have accumulated by the end of the 35th year? Kelly went to a store to purchase a coffee pot. She will use a coupon for 20% off. She can calculate the cost before sales tax using the following expression, where c represents the original cost of the coffee pot.c0.2cWhich other expression could Kelly use to calculate her cost before sales tax?A. 0.8cB. 1.2cC.1.8cD.80c Find the volume of this sphere.Use 3 for TT.-d=6inV [?] in V = rEnter hat is the maximum speed of a point on the outside of the wheel, 15 cm from the axle? why does piaget's theory of cognitive development is that it underestimates the cognitive capacities of infants. "Sit, worthy friends: my lord is often thus, / And hath been from his youth: pray you, keep seat; /The fit is momentary; upon a thought/ He will again be well: if much you note him,/ You shall offend him and extend his passion: / Feed, and regard him notAre you a man?" (3.4.53-55)