Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Oshawa Motors Limited is considering purchasing a paint machine. The machine will result in before tax cost savings of $30,000 per year for 10 years. Assume CCA rate of 30%, salvage value of zero, and asset pool will remain open. The paint machine will not add/reduce the risk of the firm. Cost of unlevered equity is 12%, corporate tax rate is 40%, and risk free rate of return is 4%. Hint: Use risk free rate to discount CCATS.

a. What is the maximum price Oshawa should pay for the machine?

b. Suppose due to economic conditions provincial government is willing to lend Oshawa $100,000 at 3% for 5 years. Interest will be paid each year on the outstanding balance at the beginning of each year. Principal will be paid back in 5 installments of $20,000 each at the end of each year of the loan. Using APV approach, what is the maximum price Oshawa would be willing to pay for the machine if Oshawa's cost of debt is 6%

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M946820

Have any Question? 


Related Questions in Basic Finance

Question 1 - bondsyou have just purchased 5 million par

Q UESTION 1 - B ONDS You have just purchased $5 million par amount of the 5yr and 30yr US Treasury bonds shown below, at the prices shown. (Assume all bonds are semi-annual compounding.)   Par Amt            Coupon       ...

Budget analysis needed asapi need a budget analysis

Budget analysis needed ASAP I need a budget analysis completed. I will provide the template and previous assignments needed to complete this project. I am on a time crunch and need this done ASAP. Using the workbooks and ...

Briefly explain in which of the following situations moral

Briefly explain in which of the following situations moral hazard is likely to be less of a problem. a. A manager is paid a flat salary of $150,000. b. A manager is paid a salary of $75,00 plus 10% of the firm's profits.

1 what do you see as the biggest challenges in conducting a

1. What do you see as the biggest challenges in conducting a brand audit? What steps would you take to overcome them? 2. Pick a brand. See if you can assemble a brand inventory for it.

Go to turbotaxintuitcomtax-tools and click tax refund

Go to turbotax.intuit.com/tax-tools/ and click "Tax Refund Calculator" to answer the following questions: a. Assume that your filing status is single, you are not head of household, and you are 35 years old. Compute your ...

You have been asked to evaluate the effects of a new

You have been asked to evaluate the effects of a new educational video that was developed to reduce racial prejudice among adolescents. You plan to administer a pretest measure of racial attitudes to 60 adolescent partic ...

Read and study the following experimental designsfor eacha

Read and study the following experimental designs. For each: a. Identify the number of factors and the number of levels within each of the factors. Identify whether each of the factors is between participants or repeated ...

1 what is noise trading2 what is herd behavior and how can

1. What is noise trading? 2. What is herd behavior, and how can it lead to a bubble in a financial market? 3. Some mutual funds have started behavioral finance funds that attempt to use insights from behavioral finance i ...

On august 20 a stock index futures which expires on

On August 20 a stock index futures, which expires on September 20, was priced at 429.70. The index was at 428.51. The dividend yield was 2.7 percent. Discuss the concept of the implied repo rate on an index arbitrage tra ...

1 former federal reserve chairman alan greenspan once

1. Former Federal Reserve Chairman Alan Greenspan once argued that it is very difficult to identify bubbles until after they pop. What is a bubble, and why might bubbles be difficult to identify? 2. The British economist ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro