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Consider two firms, With and Without, that have identical assets that generate identical cash flows. Without is an all-equity firm, with 1 million shares outstanding that trade for a price of $24 p
Operating cash flows rather than accouting income are listed. Why do we focus on cash flows as opposed to net income in capital budgeting?
In capital budgeting, should we recognize this fact by estimating daily project cash flows and then using them in the analysis? If we do not, are our results biased? If so,would the NPV be biased
Cite and briefly discuss six factors that can be especially difficult to quantify for inclusion in a capital budgeting NPV calculation.
The tax rate is 35 percent, and we require a 15 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within A?&plus
Calculate the aftertax cost of debt under each of the following conditions.
Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?
Someone paid $10,000 (CF at t=0) for an investment that will pay $750 at the end of each of the next 5 years, then an additional lump sum of $13,500 at the end of the 5th year. What is the expect
The corporation is evaluating a project that will cost $150,000; it is expected to last for 8 years and produce before-tax cash flows, including depreciation, of $52,302 per year. If the firm's cos
Cortez Art Gallery is adding to its existing buildings at a cost of $2 million. The gallery expects to bring in additional cash flows of $520,000, $700,000, and $1,000,000 over the next three years.
Assume that you will receive $2,000.00 a year in year 1 through 5; $3,000.00 a year in years 6 through 8; and $4,000.00 in year 9. All of the cash flows will be received at the end of the year. If y
The equity section of the balance sheet for Hilton Web-Cams looks like this. How many shares has the company issued?
The dividend payout ratio will be 40% and return on equity will be 15%. if the required rate of return is 12%, which on the following is closest to the value of the stock?
The next annual dividend payment by Hot Wings, Inc., is expected to be $4.95 per share and is expected in 1 year. Subsequent dividends are anticipated to grow by 3 percent a year forever. If the sto
The variable materials cost is $5.43 per unit, and the variable labor cost is $3.13 per unit. What is the variable cost per unit?
The only capital investment required for a small project is investment in inventory. Profits this year were 21,000 and inventory increased from $8,500 to $9,200. What was the cash flow from the proj
Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase, but investment in inventory will decline due to increased efficiencies in get
EBM Corporation utilized $2 million in total assets last year to generate $5 million in sales. EBM's net profit margin was 4% and its debt ratio was 40%. What was EBM's return on equity?
Fuji Software, Inc., has the following mutually exclusive projects.
The following factors are all things that affect a company's weighted average cost of capital (WACC.) Which one is is the firm least able to control directly?
What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is?
Bailey and Sons has a levered beta of 1.10, its capital structure consists of 40% debt and 60% equity, and its tax rate is 40%. What would Bailey's beta be if it used no debt, i.e., what is its unle
Given the following information: Annual sales in units= $30,000, Cost of placing an order= $60.00. What is the average inventory based on the EOQ and the exisiting safety stock?
The depreciation expense is $36,000 a year and the fixed costs are $58,000 annually. The tax rate is 35 percent. What is the project's operating cash flow?
What is the Economic Order Quantity (EOQ) for a firm that sells 5,000 units when the cost of placing an order is $5 and the carrying costs are $3.50 per unit?