Xcompany is considering replacing one of its machines in order to save operating costs. operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $50,000 per year. the new machine will cost $70,000 and will last for five years, at which time it can be sold for $3,000. the current machine will also last for five more years but will not be worth anything at that time. it cost $34,000 three years ago but is currently worth only $5,000. assuming a discount rate of 7%, what is the incremental net present value of replacing the current machine with the new machine?

You are chairman of the board of a successful technology firm. there is a nominal federal corporate tax rate of 35 percent, yet the effective tax rate of the typical corporation is about 12.6%. your firm has been clever with use of transfer pricing and keeping money abroad and has barely paid any taxes over the last 5 years; during this same time period, profits were $28 billion. one member of the board feels that it is un-american to use various accounting strategies in order to avoid paying taxes. others feel that these are legal loopholes and corporations have a fiduciary responsibility to minimize taxes. one board member quoted what the ceo of exxon once said: “i’m not a u.s. company and i don’t make decisions based on what’s good for the u.s.” what are the alternatives? what are your recommendations? why do you recommend this course of action?

Brandt enterprises is considering a new project that has a cost of $1,000,000, and the cfo set up the following simple decision tree to show its three most likely scenarios. the firm could arrange with its work force and suppliers to cease operations at the end of year 1 should it choose to do so, but to obtain this abandonment option, it would have to make a payment to those parties. how much is the option to abandon worth to the firm?

How should the financial interests of stockholders be balanced with varied interests of stakeholders? if you were writing a code of conduct for your company, how would you address this issue?