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1.A firm is buying a new machine that has the following cash-flows during its expected life...

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Finance

1.A firm is buying a new machine that has the followingcash-flows during its expected life of 4 years: Purchase Price =$250,000, Terminal Value = $100,000, and yearly cash flows of$60,000. The firm has a contract with a buyer who purchases andpays the product that the machine makes at the beginning of eachyear. What is the expected yield of the machine? a. 28% b. 16% c.14% d. 11.3% e. -1.61

2.A firm wants to buy a machine that is expected to yield 12%.It plans to finance it with 50% Debt and the rest Equity, so thereis no preferred stock. The cost of Debt is 7% and the tax rate is25%. What is the expected return for the shareholders?

a.   2.63%

b.   12%

c.   17%

d.   18.75%

e.   19.5%

3.Which of the following statements isCORRECT?

a.   Financial Managementdecisions have to be made taking into account what is available onthe Financial Markets.

b.   Only firms in themature stage have access to the capital market.

c.   If an investor sellsshares of stock through a broker, then it would be a primary markettransaction.

d.   Capital markets dealonly with common stocks and other equity securities.

e.   A six-month bank loanis considered to be a capital market instrument.

Answer & Explanation Solved by verified expert
3.8 Ratings (522 Votes)
1b 162 d 18753 aFinancial management decisions depend upon information    See Answer
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