You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained the property from a borrower who defaulted on his loan. First Capital is offering the property for $308,000. If you buy the property, you believe that you will have to spend (1) $12,300 on various acquisition-related expenses and (2) an average of $3,800 per month during the next 12 months for repair costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is willing to provide $288,000 in financing at 4.25 percent interest for 12 months payable monthly (interest only). Your market research indicates that after you repair the property, it may sell for about $366,000 at the end of one year. Furthermore, you will probably have to pay about $4,800 in fees and selling expenses in order to sell the property at that time. Required:
a. If you wanted to earn a 20 percent return compounded monthly, do you believe that this would be a good investment?
b. Is this a good investment and why?
c. What counter offer would you consider making First Capital and why?

Sauer food company has decided to buy a new computer system with an expected life of three years. the cost is $440,000. the company can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. assume interest is paid in full at the end of each year. a. how much would sauer food company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 12 percent rate? compare this to the 14 percent three-year loan.

A$100 million interest rate swap has a remaining life of 10 months. under the terms of the swap, the six-month libor is exchanged semi-annually for 12% per annum. the six-month libor rate in swaps of all maturities is currently 10% per annum with continuous compounding. the six-month libor rate was 9.6% per annum two months ago. what is the current value of the swap to the party paying floating? what is its value to the party paying fixed?

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept,the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year.to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51