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Firms often involve themselves in projects that do not result directly in profits. For example, IBM and ExxonMobil frequently support public television broadcasts. Do these projects contradict the g
Compute labor, material, machine and overhead productivity. Compute the overall productivity. If production time of each 2nd type device is 25% more than that of 1st type then compute overall product
Dallas Company has a total value of $65 million. Its debt is in the form of zero-coupon bonds, which will mature in 9 years. The face value of bonds is $15 million. The riskless rate is 3.5% at pres
Corpus Christie Inc has $10 million face value zero-coupon bonds due in 6 years, and its σ is 0.4. The total market value of Corpus Christie is $25 million and the riskless rate is 4%. The com
What are possible capital components in the WACC equation? why WACC is important in the corporate finance world. How easy do you think it is to calculate the WACC in the real world?
Doublewide Dealers has an ROA of 10 percent, a 2 percent profit margin, and an ROE of 15 percent. What is the total assets turnover? What is it's equity multiplier?
Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the
Papa Roach Exterminators, Inc., has sales of $704,000, costs of $345,000, depreciation expense of $37,000, interest expense of $26,000, and a tax rate of 30 percent. If the firm paid out $80,000 in
Construct a balance sheet and estimate the annual take-home income of the Williams' family from the information presented below:
Home equity loans to consumers are generally based on the residual value of a home (i.e., market value less the remaining balance on the outstanding home mortgage loan) and the fraction of the value
The market rate of return is 10.8 percent and the risk-free rate is 4.1 percent. What is the cost of equity for Ziegler's Supply?
Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next per
She estimates that she will receive the following cash flows in the coming 6 years. The cost of capital is 7%. What are the NPV and IRR of the project?
Assuming that Reed's can improve its operations to be in line with the industry averages, construct a 1995 pro forma income statement. Assume that net sales will be reduced 5 percent to $1,938,000 b
What effect would each of the following events likely have on the level of nominal ?interest rates?
One tool of financial analysis is common-sized financial statements. Why do you think common-sized income statements and balance sheets are used? Note that the accounting statement of cash flows is
The before-tax cost of debt is 9 percent, and the company's tax rate is 30 percent. If the expected dividend next period (D1) and current stock price are $5 and $45, respectively, what is the compan
The riskless rate at the time was 4%, and the σ of Galveston Corporation was 0.5. Find the amount of money that went to Thomas and to Gerard.
After three years the dividend is expected to grow at a constant rate of 4% per year indefinitely. Stock holders require a return or 14% to invest in Bayboro's common stock. Compute the value of Bay
Mccue mining company ore reserves are being depleted, so the firms sales are falling. In addition, its pit is getting deeper each year, so its cost are rising. as a result, the company's earnings an
Many years ago minnow bait and tackle issued preferred stock. The stock pays an annual dividend equal to $6.80. If the required rate of return on similar risk investments is 8% what should be the ma
Which one of the following terms is defined as dividends paid expressed as a percentage of net income?
Assume that you are the portfolio manager of the Coastal Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 10.00% and the risk-free rate
First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City Bank pays 9 percent interest compounded annually.
Irving Company has total value $325 million, and it has $100 million (face value) of zero-coupon bonds maturing after 10 years. The σ of Irving is .45 and the risk-free interest rate is 5%. Us