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kogti [31]
3 years ago
5

Consider a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in

net working capital and a zero scrap value after five years. For simplicity, assume straight-line depreciation to zero, a marginal tax rate of 34 percent, and a required return of 10 percent. The net present value of acquiring this machine is:A) $83.B) $449.C) $689.D) $827.E) $1,235.
Business
1 answer:
ki77a [65]3 years ago
8 0

Answer:

A) $83

Explanation:

First, find aftertax OCF per year

aftertax OCF = (Operating benefit - depreciation)*(1-tax) +depreciation

Depreciation per year = 10,000/5 = 2,000

Tax = 34%

aftertax OCF per year = (3,000 - 2,000)*(1-0.34) + 2,000

= 660 +2,000

= 2,660

Next, find the PV of the aftertax OCF per year. It is an annuity;

PMT = 2,660

N = 5

I/Y = 10%

FV = 0

then CPT PV = 10,083.493

Subtract the initial cost of the machine to find the Net Present Value (NPV);

NPV = -$10,000 + $10,083.493

NPV = $83.493

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The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 1
SOVA2 [1]

Answer:

$287.01

Explanation:

The 2 stage dividend discount model would be used to determine the current value of the stock.

first stage

Present value in year 1 = (1.6 x 1.16) / 1.071 = 1.73

Present value in year 2 = (1.6 x 1.16²) / 1.071² = 1.88

Present value in year 3 = (1.6 x 1.16³) / 1.071³ =2.03

Present value in year 4 = (1.6 x 1.16^4) / 1.071^4 = 2.20

second stage

[ (1.6 x 1.16^4) x (1.06) ] / (0.071 - 0.06) = 279.17

Value of the stock = 1.73 + 1.88 + 2.03 + 2.20 + 279.17 = $287.01

4 0
2 years ago
The phantom corporation started 5,200 units during february. phantom started the month with 740 units in process (40% complete)
lutik1710 [3]
Hi there

units were transferred to the finished goods inventory during february
5,200+740−440
=5,500...answer

Good luck!
6 0
3 years ago
Perion Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direc
Yuliya22 [10]

Answer:

$4,280 under applied

Explanation:

Given that;

Estimated direct labor hours = 11,200

Estimated manufacturing overhead = $259,840

Estimated rate per hour = $259,840 ÷ 11,200 = $23.2

Actual labor hours = 10,800

Estimated overhead for actual hours

= 10,800 × $23.2

= $250,560

Actual overheads incurred = $254,840

Hence, actual overheads are under absorbed by

= $254,840 - $250,560

= $4,280

4 0
2 years ago
he hedge ratio of an at-the-money call option on IBM is 0.35. The hedge ratio of an at-the-money put option is -0.65. What is th
Kazeer [188]

Answer:

- 0.30

Explanation:

Given the following :

Hedge ratio of an at-the-money call option on IBM = 0.35

Hedge ratio of an at-the-money put option = - 0.65

Hedge ratio of an at-the-money straddle =?

Hedge ratio of an at-the-money straddle is given by :

(Hedge ratio of an at-the-money call option + Hedge ratio of an at-the-money put option)

Hedge ratio of an at-the-money straddle :

(0.35 + (-0.65))

= (0.35 - 0.65)

= - 0.30

5 0
3 years ago
Mallard Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 4
KiRa [710]

Answer:

1. Cost per unit = 860,500/45000 units = $19.12

2. Mark up = 12% * 800,000 = $96,000/45000 units = $2.13

mark up = 2.13/19.12 = 11.14%

3. Therefore selling price per unit = $19.12+$2.13 = $21.25

Explanation:

Variable direct materials cost per unit............................ 5.50

Variable direct labor cost per unit.................................... 7.65

Variable factory overhead cost per unit .........................2.25

Variable selling and administrative cost per unit........... .90

TOTAL VARIABLE COST PER UNIT..................................16.3

TOTAL VARIABLE COST = $16.3*45000 units = $733,500

Fixed factory overhead cost $82,000

Fixed selling and administrative costs 45,000

TOTAL COST = $ 860,500

1. Cost per unit = 860,500/45000 units = $19.12

2. Mark up = 12% * 800,000 = $96,000/45000 units = $2.13

mark up = 2.13/19.12 = 11.14%

3. Therefore selling price per unit = $19.12+$2.13 = $21.25

5 0
3 years ago
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