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Nelson Manufacturing is considering a project which would require a $6.2 million investment today (t = 0). The after-tax cash flows the factory generates will depend on whether the state imposes a n
Annual net cash flows include depreciation expenses, Calculate NPV and IRR for each type of truck, and decide which to recommend.
The shoe co. has a beta of .96. The risk-free rate of return is 4.6 percent and the expected return on the market is 13.5 percent. What is the cost of the equity?
Kingston, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,22
As an all-equity firm, management believes the earnings before interest and taxes (EBIT) will be $31,000 if the economy is normal, $11,000 if it is in a recession, and $37,000 if the economy booms.
What discounted cash flow approach works best when projects require different amounts of initial cash investment? Explain.
In view of public welfare, should the government impose more restrictions against the entry of foreign banks into Hong Kong? Explain the rationale behind your answer.
A corporate bond maturing in 20 years with a coupon rate of 8.9 percent was purchased for $980. What is its current yield?
The projects are equally risky, and their cost of capital is 12%. You must make a recommendation, and you must base it on the modified IRR(MIRR). What is the MIRR of better project
Why stock index futures and options sometimes are referred to as derivative products? Why do some investors believe derivative products make the markets more volatile?
Assume tht there are always investors lookign for positivie alpha and no investor would invest in a fund with a negative alpha. In equilibrium, that is, when no investor either takes out money or wi
Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has 3 years until maturity.
A 20-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent yield if the bond price is:
Smith Technologies is expected to generate $150 million in free cash flow next year, and the FCF is expected to grow at a constant rate of 5% per year indefinitely. Smith has no debt or preferred st
The correlation between these services has been estimated to be +.10 and the bank estimates that 90 percent of its business will be from traditional services and 10 percent from the new underwriting
What happens to expected portfolio return if the portfolio beta increases from 1.0 to 1.5, the risk-free rate decreases from 5% to 4%, and the market risk premium increases from 8% to 9%?
What are the betas of the two stocks? What is the expected rate of return on each stock if the market return is equally likely to be 5% or 20%? If the T-bill rate is 8%, and the market return is equal
What are the four element s of credit policy? To what extent can the firm set thier own credit policies as t o having to accept policies that are dicticted by the competition?
David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity. The yield to maturity on the company's outstanding bonds is 9 percent, and the company's tax rate is 40 pe
Assume IBM is expected to pay a total cash dividend of $4.50 next year and its dividends are expected to grow at a rate of 5% per year forever. Assuming annual dividend payments, what is the current
Find the holding-period return for a 1-year investment period if the bond is selling at a yield to maturity of 7% by the end of the year.
How would each of the following changes tend to affect aggregate (that is, the average for all corporations) payout ratios. Other things held constant? Explain your answers.
Warr Corporation just paid a dividend of $3 a share (i.e., D0 = 3. The dividend is expected to grow 9% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per
Indirect finance is more important than direct finance in most countries in part because of information costs associated with lending. Why are financial intermediaries relatively more effective at r
General Technology's capital is from the following channels: 30% from debt paying 9% interest rate, and 70% from common equity. The cost of equity is 13%. The marginal tax rate is 40%. What's the WA