Questions from Corporate Finance

Q: Mom's Cookies, Inc. is considering the purchase of a new

Mom's Cookies, Inc. is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33. The old...

Q: You are evaluating a project for The Tiff-any golf club

You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $400 per unit and sales volume to be 1,000 units in...

Q: Continuing the previous problem, what is the operating cash flow for

Continuing the previous problem, what is the operating cash flow for the project in year 2?

Q: You are considering the purchase of one of two machines used in

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $80 initially, and then $125 per year in maintenance costs. Machine B...

Q: Your company is considering a new project that will require $1

Your company is considering a new project that will require $1 million of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a...

Q: You are trying to pick the least-expensive car for your

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $14,000 to purchase and which will have OCF of -$1,200 annually throug...

Q: You are evaluating two different cookie-baking ovens. The Pillsbury

You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $57,000, has a five-year life, and has an annual OCF (after tax) of -$10,000 per year. The Keebler CookieMunster costs $90...

Q: Suppose you sell a fixed asset for $109,000 when

Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be t...

Q: Your firm needs a computerized machine tool lathe which costs $50

Your firm needs a computerized machine tool lathe which costs $50,000, and requires $12,000 in maintenance for each year of its three-year life.

Q: If the lathe in the previous problem can be sold for $

If the lathe in the previous problem can be sold for $5,000 at the end of year 3, what is the after-tax salvage value?