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Company X is 60% debt-financed and the expected return on its debt is 6%. Its equity beta is 2. Risk-free rate of return is 4% and market risk premium is 4%. Assume a MM world with no taxes.
Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 4 cash flow?
What is the break-even point? What decisions does the break-even point help an organization make? What actions might an under performing organization take to reach the break-even point?
Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?
A project has an initial outlay of $100,000. It has a single payoff at the end of year 4 of $200,000. What is the internal rate of return for the project (round to the nearest %)?
What is the chosen NPV versus the maximum possible NPV? Note that (1) ""true value"" is measured by NPV, and (2) under some conditions the choice of IRR vs. NPV will have no effect on the value
Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
M & M wood corp. uses no debt. The weighted average cost of capital is 9%. If the current market value of the equity is $ 23 million and there are no taxes, what is EBIT?
Briefly explain the pros and cons of financial leverage. In other words, what are its benefits, and what are the costs that come along with those benefits?
Explain in words the ROCE test for the advisability of adding leverage. That is, what is the test really telling us? When will it indicate a company is doing the wrong thing?
Explain the difference between a fixed and a variable cost. How do these concepts change as the time horizon lengthens?
The user of leverage might be thought of as taking advantage of the provider. Between stockholders and bondholders, who is the user and who is the provider?
The central issue underlying the study of leverage is whether or not it influences stock price and whether there's an optimal structure.
Both business risk and financial risk would exist with or without either type of leverage. Leverage just makes them more significant. Are these statements true or false?
You have just taken out an installment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly installments of $9,456 and the first monly payment will be due one month from today.
Two types of cars were produced by a car manufacturer in 2008. Quantities sold, prices per unit, and labor hoursfollow. What is the labor productivity for each car?
Maxvill Motors has annual sales of $15,000. Its variable costs equal 60% of its sales, and its fixed costs equal$1,000. If the company's sales increase 10%, what willbe the percentage increase in th
Why do labor-intensive processes involve less operating leverage than automated processes? What fixed costs are associated with automation?
Describe the concept of the breakeven point in words by using the concept of contribution and fixed costs.
If the CEO of a firm were filling out a fitness report on adivision manager (i.e., "grading" the manager), which of the following situations would be likely to cause the manager to get a BETTER GRAD
John borrows 150,000. The terms of the laon are 7.5% over thenext 5 years. It is important to note that he makes annual rather than monthly payments. Construct a loan amortization schedule that sho
The Armageddon Corp is in big trouble. Sales are down and profits are off. On top of that, the firm's credit rating has been reduced so it's facing very high interest rates on anything it borrows
When do you think a research is "marketing research"? Discuss the marketing research as a separate field of research, in an organization.
Discuss types of managers in different organizations with appropriate examples.
Compare the implications of the MM model with taxes and bankruptcy costs to the things we discovered by studying the Arizona Hot Air Balloon Corporation.