Corbett Manufacturing can invest in one of two mutually excl…

Corbett Manufacturing can invest in one of two mutually exclusive machines that will make a product it needs for the next 6 years.  Machine C costs $10 million but realizes after-tax inflows of $4.2 million per year for 3 years, after which it must be replaced.  Machine D costs $14 million and realizes after-tax inflows of $3.4 million per year for 6 years.  Based on the firm’s cost of capital of 11 percent, the NPV of Machine D is $383,829, with an equivalent annual annuity (EAA) of $90,728 per year.  Calculate the EAA of Machine C. Compare your result to that of Machine D and decide which to recommend.

The Harden Company’s cost of common equity is 12 percent, it…

The Harden Company’s cost of common equity is 12 percent, its before-tax cost of debt is 8 percent, and its marginal tax rate is 30 percent.  Given Harden’s market value capital structure below, calculate its WACC. Long-term debt $11,000,000 Common equity   39,000,000 Total capital $50,000,000

Clemson Software is considering a new project whose data are…

Clemson Software is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project’s 3-year life. What is the project’s Year 1 operating cash flow?   Equipment cost (depreciable basis) $65,000     Sales revenues, each year $60,000 Operating costs (excl. deprec.) $25,000 Tax rate 35.0%    

Susan recently received a credit card with a nominal interes…

Susan recently received a credit card with a nominal interest rate of 19 percent.  With the card, she purchased some new clothes for $325.  The minimum payment on the card is only $10 per month.  If Susan makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?