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Suppose further that the MRP on a 10-year T-bond is 0.90%, that no MRP is required on a TIPS, and that no liquidity premium is required on any T bond. Given this information, what is the expected ra
Prepare the current assets section of the balance sheet for Henley Company. Assume that in addition to the receivables it has cash of $90,000, merchandise inventory of $130,000, and prepaid expenses
Explain why identifying and valuing the real options can help managers make better investment decisions.
Then 7% and remain constant thereafter. The company stock has a beta equal to 1.2, the risk free rate is 7.5% and the market risk premium is 4%. What is your estimate of stock's current price?
The project will require $13000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 6 percent and a tax rate o
Gehr's Gears, Inc., has bonds outstanding that mature in 14 years and 3 months from today. The bonds have an annual coupon rate of 15% and pay interest every six months. The bonds are currently sell
Tapley's tax rate is 30 percent, and its current stock price is $88 per share. If the firm has an unlimited number of projects which will earn a 10.25 percent return, what is the maximum capital bud
Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year
Etsitty Arts, Inc., a leading producer of fine cast silver jewelry, is considering the purchase of new casting equipment that will allow it to expand the product line into award plaques.
What is the NPV of this investment if the cost of capital is 6%? Should the firm undertake the project? Repeat the analysis for discount rates of 2% and 12%. How many IRRs does this investment oppor
Explain the difference between Cost of Capital, MARR ,and Internal Rate of Return. Include examples.
Determine the probability of earning a return greater than 30 percent over the coming year from your investment in Farrell common stock.
Analyze the loan request from the viewpoint of a lender who uses the "five Cs" of credit analysis as an aid in deciding whether to make loans.
Calculate the expected portfolio return, rp, for each of the 6 years. Calculate the expected value of portfolio returns, p, over the 6-year period. Calculate the standard deviation of expected portfol
A non-dividend-paying stock with a volatility of 20% per annum is currently trading at $50. r=6%. Using the 1-step binomial tree model, calculate the value of a 1-year European call option with X=$5
Company A has a bond outstanding with $90 annual interest payment, a market price of $820 and a maturity date in five years. Assume the par value to be $1,000. What is the bond's coupon rate and cur
Assume that the Santa Barbara Co. in the United States will need 300,000 ringgit in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market
The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The company's required rate of return is 16 percent. What is the present value of the tax savings related
Investors require a 12 percent return on the stock for the first 3 years, a 9 percent return for the next 3 years, and an 5 percent return thereafter. The current share price for GPF stock is
What is the terminal or horizon value of operations? Calculate the value of Brooks operations.
Assume that both portfolios A and B are well diversified, that E(rA) = 11%, and E(rB) = 9%. If the economy has only one factor, and βA = 1.5, whereas βB = 1.1, what must be the risk-free r
Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The firm is subject to 40% tax rate.
Calculate the earnings per share of Bozo Oil's common stock. Assuming that a share of Bozo Oil's common stock has a market value of $40, what is the firm's price-earnings ratio? Calculate the book val
Three stocks have shares prices of $12, $75 and $30 with total market values of $400 million, $350 million and $150 million respectively. If you were to construct a price-weighted index of the three
Calculate Touring Enterprises' weighted average cost of capital (WACC). Work as follows: first, compute the after-tax cost of debt, then compute the cost of equity. Cite both formulas, and show all