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k0ka [10]
4 years ago
11

Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 y

ears. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $38,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $8,200 per year. It would have zero salvage value at the end of its life. The Project cost of capital is 12%, and its marginal tax rate is 35%. Should Chen buy the new machine?
Business
1 answer:
Lelu [443]4 years ago
5 0

Answer:

Yes they should buy the new machine.

Explanation:

since the new mill produces after tax cash savings of $8,200 per year, we should calculate the net present value of the 10 cash flows in order to determine if the project is profitable or not.

using a present value annuity factor for 10 years and 12% discount rate = 5.6502

the project's NPV = ($8,200 x 5.6502) - $38,000 = $46,331.64 - $38,000 = $8,331.64

since the NPV is positive, the project is profitable.

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Suppose an investor is interested in purchasing the following income producing property at a current market price of $450,000. T
Vikki [24]

Answer:

Net Present value of Project is $9,890

Explanation:

Net present value is the Net value all cash inflows and outflows in present value term. All the cash flows are discounted using a required rate of return.

Net Present Value of Property is $9,890

Workings are made in an MS Excel file, which is attached with this answer. please find it.

Download xlsx
6 0
3 years ago
Schwartz, Inc. is looking to hire one of the many outstanding students from the Management 212 class. On January 1, 2021, Schwar
ch4aika [34]

Answer:

Oral Employment Contract

We shall assume that Schwartz Inc. changed its mind some period before the May 2021 Johnny's graduation date.

We can argue that the contract is voidable by Schwartz because it was an oral contract.  The protections accorded a written contract are missing.  And the conditions for voiding the contract are not clearly enumerated as in a written contract.

The contract duration favors Johnny more than Schartz, Inc. because it is for a year and no more.

Therefore, since the employment contract is for a year, it is legally enforceable by Johnny.

Explanation:

But if Schwartz were to void the contract in May 2021 when no opportunity would be given to Johnny to enter into another contract immediately, we could conclude that to void the contract was unconscionable.  Contracts are not voidable with a change of mind, most especially if the other party would suffer some damages as result.  Contracts require legal reasons for voiding them.

8 0
3 years ago
Jerrod's typical attire is that of baggy jeans decorated with chains, t-shirts with sometimes inappropriate phrases on them, and
s344n2d4d5 [400]
<span>Jerrod could do better at making his attire interview ready. A nice suit and tie instead of baggy jeans would be a good idea. He could spice up his resume also. Another way to get hired is to research about the company. Companies like if you have an interest enough to learn about their company</span>
5 0
3 years ago
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $125 per share for months, and you believ
Bezzdna [24]

Answer:

The price of a 6-month call option on C.A.L.L. stock is $13.52

Explanation:

According to the given data we have the following:

P = Price of 6-months put option=$10.50.

So = Current price=$125

X = Exrecise price=$125

r = Risk free interest rate= 5%

T = Time 6 months = 1/2

In order to calculate the price of a 6-month call option on C.A.L.L. stock at an exercise price of $125 if it is at the money, we would have to use the formula of put-call parity as follows:

C=P+So- (<u>   X   )</u>

              ( 1+r)∧T

C=$10.50+$125-(<u>$125   )</u>

                            (1+0.05)∧1/2

C=$135.5-121.98

C=$13.52

The price of a 6-month call option on C.A.L.L. stock is $13.52

3 0
3 years ago
The Pioneer Company has provided the following account balances: Cash $38,600; Short-term investments $4,600; Accounts receivabl
Artyom0805 [142]

Answer:

Total Current Assets      $ 100,800

Explanation:

The current asset are those assets which are cash cash or the firm expect to convert in cash within a 12 month period (one-year)

Assets with a useful life or collection date longer than a year will be considered non-current thus, non included in current asset

Cash                                $  38,600

Short-term investments $     4,600

Accounts receivable      $    51,000

Supplies                        <u>  $     6,600  </u>

Total Current Assets      $ 100,800

4 0
3 years ago
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