Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Basic Finance Expert

Finance


Home >> Basic Finance

Question: Palermo Corporation (PC) is considering a project, which involves purchasing of an air blast sprayer machine. The machine will be used in the citrus production division of the company. The price of the machine delivered is $30,000 today; however, it also cost $5,000 to adjust/assemble the machine to make it complete for use. The machine is in 5 year MACRS class life for depreciation. Due to the efficiency of the machine, labor expenses of the division will be reduced by $10,000 per year and revenue of the division will be increased by $15,000 per year for the next six years. PC tax rate is 34% and the company's weighted average cost of capital is 10.5 percent.

Please advise PC to take this investment or not. You are required to explain your justification and approach in 4 lines and show your complete calculations. Show work.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92863923

Have any Question?


Related Questions in Basic Finance

You are bearish on telecom and decide to sell short 100

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $47 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requi ...

What is net present value in terms of evaluating a project

What is Net Present Value in terms of evaluating a project? What is better NPV or Internal Rate of Return when evaluating?

What are the implications of increased index investing for

What are the implications of increased index investing for market efficiency?

How can health systems developers ensure the protection of

How can Health systems developers ensure the protection of patient health information during the system development process

Xyz stock price and dividend history are as

XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End   2010 $ 122               $ 5                      2011 132               $ 5                      2012 $ 110   ...

Flyby corp purchased 200 shares of stock at a price of 6130

FLYBY Corp. purchased 200 shares of stock at a price of $61.30 a share and sold them for $73.25 a share. FLYBY also received $192 in dividends. The inflation rate for the period was 4.7 percent. What was the approximate ...

How much would you pay for a share of preferred stock that

How much would you pay for a share of preferred stock that pays a $3.25 dividend and your required return for an investment of this kind is 7%?

What are the benefits of franchise to both the franchisee

What are the benefits of franchise to both the franchisee and franchiser and What factors would you consider if interested in buying a franchise?

Q1 you need a loan to purchase new equipment the loan will

Q1. You need a loan to purchase new equipment. The loan will be paid off over 12 years with payments made at the end of every quarter. If the stated annual rate is 07.00% and quarterly payments are $715, what is the loan ...

What is the yield to maturity ytm on a 5-year 1000 bond

What is the yield to maturity (YTM) on a 5-year, $1,000 bond that pays annual payments of $100 that has a current value of $1,112? (rounded to 2-digits)

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As

Follow Us

© Copyright 2013-14 mywordsolution.com All rights reserved