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What are some of the characteristics of a firm with a long operating cycle?
What is firms cost to equity and weighted average cost of capital at this time? According to pure MM with-tax model, what is the optimal level of debt?
Funds raised from the bonds will be used to repurchase outstanding shares. The effective tax rate is 25% at the corporate level. According to the MM theory, what is the initial change in equity valu
The $8 million is represented by 8,000 different $1,000 bonds. Each $1,000 bond pays 3% interest. The conversion ratio is 30. The firm is in a 30% tax bracket. What is Vickrey's diluted earnings per
Davisson Hospital is tax exempt and it needs a NMR machine, which is expected to generate revenue of $60,000 annually. Its life will be either 4 years (probability 70%) or 5 years (probability 30%).
Straight line depreciation was used to depreciate the rental real estate. The rental properties will be sold at a substantial loss, and the development property will be sold at a substantial gain. W
You are given the following information for Eastern Valley Inc. Calculate WACC
The operating cycle is the period from inventory purchase until the receipt of cash. Different company characteristics generally define the type of operating cycle that a firm experiences. Five diff
Define the Internal Rate of Return (IRR) method in capital budgeting and state the IRR Decision rule.
Continuing from previous question, graph the total net profit (i.e.,cumulative profit less net intial cost, ignoring time value considerations)relationship using the June USD/GBP rate on the horizo
The convention in Zanadu financial markets is that the market yield and coupon rate are quoted as nominal rates. What is the market value of the bonds? Show all working.
The firm has a debt issue outstanding with 10 years to maturity that is quoted at 97 percent of face value. The issue makes semiannual payments and has an embedded cost of 11 percent annually. Compa
Given the nature of corporate financing and investment decisions, that focus on long-term operations is appropriate. In periods of rapid change where long-term outlooks are uncertain or in flux, a
To maintain the current capital structure, how much of the capital budget should be financed by external equity? Determine the cost of each individual component. Compute the WMCC.
what is the market value of the firm's equity if the FCFE grows at 10% for the next 3 years and then at a constant rate of 4% thereafter? The firm's cost of equity is 12%.
The Beta 2100 system costs $3,100,321 and will produce cost savings of $991,866 in the first three years and then $2 million for the next two years. If the company's discount rate for similar projec
Cooper Office Supplies is considering a more liberal credit policy in order to increase sales. The following data is available for the company:
Southwest U's campus book store sells course packs for $16 each. The variable cost per pack is $10, and at current annual sales of 50,000 packs, the store earns $75,000 before taxes on course packs.
The return on the market portfolio is currently 13%. Battmobile Corporation stockholders require a rate of return of 21% and the stock has a beta of 3.5. According to CAPM, determine the risk-free r
Shadow Corp. has no debt but can borrow at 7 percent. The firm's WACC is currently 11 percent, and the tax rate is 35 percent. a. What is Shadow's cost of equity?
Rowell Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the project, so the building is available for sale or for a new product
Six-month T-bills have a nominal rate of 7% while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0.009. If interest rate
The firm is deciding whether to invest in a new project. The project would have to be financed by equity; the cost is $2,000 and will return $2,500 or 25% in one year. The discount rate for both bo
A debenture with a face value of $1,000 is selling for $996. The coupon is 10% pa paid semi-annually. What is the annual effective yield if the debenture has three year maturity? Show workings and n
What is the book value of the machine? Calculate the firm tax liability if it sold the machine for each of the following amounts: $100,000; $56,000; $23,200 and $15,000.