Question: This problem is much easier if you are working with
This problem is much easier if you are working with a spreadsheet. Sparky Fireworks Inc. is contemplating the purchase of a $1.2 million computer-based customer order management system. CCA on the system will be calculated at a rate of 25 percent. In five years it will be worth $575,000. When this project is over, there will still be other assets in the CCA class. Sparky would save $440,000 before taxes per year in order processing costs and would reduce working capital by $225,000 (a one-time reduction). What is the DCF return on this investment? The relevant tax rate is 34 percent.
Answer to relevant QuestionsA proposed cost-saving device has an installed cost of $60,500. It is in class 9 for CCA purposes. (CCA rates are given in Table 8A.1 in Appendix 8A.) It will actually function for six years, at which time it will have no ...Larry, owner/manager of a small restaurant, is contemplating buying a larger restaurant from its owner, who is retiring. Larry would finance the purchase by selling his existing small restaurant; taking a second mortgage on ...In Problem 9.12, suppose the scale of the project can be doubled in one year in the sense that twice as many units can be produced and sold. Naturally, expansion would be desirable only if the project were a success. This ...Suppose the returns on Canada long bonds are normally distributed. Based on the historical record, what is the approximate probability that your return on these bonds will be less than -3.3 percent in a given year? What ...Consider the following information: a. Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? b. What is the variance of this portfolio? The standard ...
Post your question