One year ago, Caffe Vita Coffee Roasting Co. (CVCRC) purchased three small-batch coffee roasters for $3.3 million. The company now finds that new roasters are available that offer significant advantages. The new roasters can be purchased for $4.5 million, have an economic life of 10 years, and have no salvage value. It is expected that the new roasters will produce a gross margin of $1.2 million per year, so that, using straight-line depreciation, the annual taxable income will be $750,000. The current roasters are expected to produce a gross profit of $600,000 per year and, assuming a total economic life of 11 years and straight-line depreciation, a profit before tax of $300,000. The current market value of the old roasters is $1.5 million. CVCRC’s tax rate is 45 percent, and its cost of capital after tax is 10 percent

Which term refers to the cost that motivates an economic decision

Suppose an economy consists of three sectors: energy (e), manufacturing (m), and agriculture (a). sector e sells 70% of its output to m and 30% to a. sector m sells 30% of its output to e, 50% to a, and retains the rest. sector a sells 15% of its output to e, 30% to m, and retains the rest.

Burke enterprises is considering a machine costing $30 billion that will result in initial after-tax cash savings of $3.7 billion at the end of the first year, and these savings will grow at a rate of 2 percent per year for 11 years. after 11 years, the company can sell the parts for $5 billion. burke has a target debt/equity ratio of 1.2, a beta of 1.79. you estimate that the return on the market is 7.5% and t-bills are currently yielding 2.5%. burke has two issuances of bonds outstanding. the first has 200,000 bonds trading at 98% of par, with coupons of 5%, face of $1000, and maturity of 5 years. the second has 500,000 bonds trading at par, with coupons of 7.5%, face of $1000, and maturity of 12 years. kate, the ceo, usually applies an adjustment factor to the discount rate of +2 for such highly innovative projects. should the company take on the project?