Order custom papers, masters thesis and dissertation in 3 guided steps; human written!
Posted:
Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given.The proposed machine will cost $120,000 and have installation costs of $15,000. It will be depreciated using a 3 year MACRS recovery schedule. It can be sold for $60,000 after three years of use (at the end of year 3).The existing machine was purchased two years ago for $90,000 (including installation). It is being depreciated using a 3 year MACRS recovery schedule. It can be sold today for $20,000. It can be used for three more years, but after three more years it will have no market value.The earnings before taxes and depreciation (EBITDA) are as follows:New machine: Year 1: 133,000, Year 2: 96,000, Year 3: 127,000Existing machine: Year 1: 84,000, Year 2: 70,000, Year 3: 74,000Burton pays 40 percent taxes on ordinary income and capital gains.They expect a large increase in sales so their Net Working Capital will increase by $20,000.Calculate the initial investment required for this projectDetermine the incremental operating cash flowsFind the terminal cash flow for the projectBurton has determined its optimal capital structure, which is composed of the following sources and target market value proportions.Debt: Burton can sell a 15-year, $1,000 par value, 8 percent annual coupon bond for $1,050. A flotation cost of 2 percent of the face (par) value would be required. Additionally, the firm has a marginal tax rate of 40 percent.Common Stock: Burton's common stock is currently selling for $75 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant 3% rate. It is expected that to sell all the shares, a new common stock issue must be underpriced $2 per share and the firm must pay 1% of market value per share in flotation costs.Calculate the after-tax cost of debtCalculate the cost of equity (for new common stock issues)Calculate the WACCBurton wants to determine if replacing their machine will benefit their shareholders (see #1). They believe the cash flows are somewhat uncertain and adjust for risk using a RADR. For the level of risk they will be taking, they prefer using a RADR of 10%.Calculate the NPV and IRR using Burtonâs cost of capital (see #2).Calculate the NPV and IRR using the RADR.Should they purchase the new machine? Why or why not?Burton has established a target capital structure of 40 percent debt and 60 percent common equity. The firm expects to earn $600 in after-tax income during the coming year, and it will retain 40 percent of those earnings. The current market price of the firm's stock is P0 = $75; its last dividend was D0 = $4.85, and its expected dividend growth rate is 3 percent. Burton can issue new common stock at a 15 percent flotation cost. What will Burton's marginal cost of equity capital (not the WACC) be if it must fund a capital budget requiring $600 in total new capital?
You Want Quality and That’s What We Deliver
We’ve put together our writing team with care, choosing talented writers who shine in their fields. Each one goes through a tough selection process, where we look for folks with deep expertise in specific subjects and a solid history of academic writing. They bring their own mix of know-how and flair to the table, making sure our content hits the mark—packed with info, easy to read, and perfect for college students like you.
We don’t do AI-written essays or copycat work—everything’s original. Competitive pricing is a big deal for us; we keep costs fair while delivering top-notch quality. Our writers are some of the best out there, and we charge rates that stack up well against other services. This means you get stellar content without draining your wallet. Our pricing is straightforward and honest, built to give you real value for your money. That’s why students turn to us for high-quality writing services that won’t break the bank.
Academic integrity is at the heart of what we do. Every paper starts from scratch, with original research and writing tailored just for you. We write 100% authentic—no plagiarism research essays. Our strict quality control process includes scanning every draft with top tools like SafeAssign and Turnitin, so you get a similarity score and proof of originality. We’re obsessive about proper citation and referencing too, crediting every source to keep things legit. It’s all about giving you peace of mind with content that meets the highest standards.
When you decide to place an order with Dissertation Writer, here is what happens: