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The tax rate is 40 percent. Due to the extremely competitive and, therefore, risky nature of the golf club business the cost of capital is estimated to be 16 percent. Calculate the payback period, t
Suppose Yon Sun Corporation's free cash flow during the just-ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of
The company's capital structure consists of debt and common stock. Given the above constraints, what portion of the capital budget will be funded with debt?
Calculate project Alpha's Net Present Value (NPV), assuming your firm's required rate of return is 10%.
What is the average stock market reaction to: (a) a dividend initiation; (b) a dividend increase; (c) a dividend termination; and (d) a dividend decrease [cut]? Are these reactions logically consist
Compute the realised rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price.
What is the current PE ratio for each company? Pacific Energy Company has a new project that will generate additional earnings of $100,000 each year in perpetuity. Calculate the new PE ratio of the
Suppose the closing stock prices for 10 consecutive trading days are $20.00, $20.10, $19.90, $20.00, $20.50, $20.25, $20.90, $20.90, $20.90, $20.75. Estimate the volatility of the stock per annum.
The company has a profit margin of 9 percent and pays out 30 percent of profits in dividends. How much external financing will be necessary? Assume there is no increase in liabilities other than tha
A loan for $500,000 is negotiated, for an annual rate of 11%, and a 15-year term with monthly payments. A payment in the amount of $5,500 is negotiated. What type of amortization loan is this?
What is the bond's yield to maturity? What is its yield to call? What is its yield to worst?
ABC's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate d
Crosby Industries has a debt-equity ratio of 1.5. Its WACC is 9 percent, and its cost of debt is 6 percent. There is no corporate tax. What is Crosby's cost of equity capital?
General Motors has a weighted average cost of capital of 9%. GM is considering investing in a new plant that will save the company $25 million over each of the first two years, and then $10 million
Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter.
Jeremy Denham plans to save $2,848 every year for the next eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use his savings towards the down payment
The City of Eagle Rock uses an Internal Service Fund to provided printing services to its various departments. It bills departments on the basis of an estimated rate per page of printed material, co
Find the current exchange rates for ten countries from around the world. List the name of each country, Capital City, exchange rate per U.S. dollar and what will be the total amount in local currenc
A firm has a capital structure with $30 million in equity and $90 million of debt. The cost of equity capital is 10% and the pretax cost of debt is 6%. If the marginal tax rate of the firm is 40%, c
Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects?
The Eurodollar futures price for a contract maturing in 91 days is quoted as 89.5. What arbitrage opportunities are open to the bank?
Calculate investment income and the balance sheet investment account for Alpha Company under the cost method and under the equity method.
What is a forward contract? How is a forward contract used to manage risk? Under what circumstances is this appropriately used?
What is an audit committee? What is the function of an audit committee? How does an audit committee in your organization insure compliance with Securities and Exchange Commission regulations?
Determine which cost or expense items varied directly with sales for the two year period. Also calculate each instatement item for 2007 as a percent of 2007 sales level and 2008.