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The equipment will be salvaged at the end of the project creating a $48,000 aftertax cash flow. At the end of the project, net working capital will return to its normal level. What is the net presen
Find the regular payback period for each project. Find the discounted payback period for each project. Assume that the two projects are independent and the cost of capital is 10%. Which project or pr
The cash outlay for Project B is $20,000. The company's cost of capital is 12%. The following table shows the after-tax cash flows. For each project, compute the NPV, the IRR, the MIRR, and indicate
Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?
What is the difference between stock price and maximization and profit maximization? Under what conditions might profit maximization not lead to stock price maximization?
Which form of financing do firms prefer to use first according to the pecking-order theory?
The machines have a 6-year life after which they are worthless. What is the equivalent annual cost of one these machines if the required return is 16 percent?
In addition, the project requires $3,000 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 15 percent
Jennifer is considering a project that will produce cash inflows of $2,100 a year for 4 years. The project has a 12 percent required rate of return and an initial cost of $6,000. What is the discoun
A firm agrees to accept annual payments on a $1,000,000 loan with a fixed interest rate of 8% in exchange for making the annual payments on a loan with floating rate payments based on LIBOR. Payment
Brau Auto, a national autoparts chain, is considering purchasing a smaller chain, South Georgia Parts (SGP). Brau's analysts project that the merger will result in the following incremental free cas
What are the partnership's bottom line net income and its separately stated items?
He also paid $14,000 in mortgage interest, $1,800 in property taxes, $300 of credit card interest, and $1400 in job hunting expenses when he tried to change jobs in March. Determine Daniel's income
CAPM: Damien knows that the beta of his portfolio is equal to 1, but he does not know the risk-free rate of return or the market risk premium. He also knows that the expected return on the market is
You are considering a project that will produce cash inflows of $2,100 a year for 4 years. The project has a 12 percent required rate of return and an initial cost of $6,000. What is the discounted
MNCs should use the spot rate for budgeting. Others argue that MNCs should use the forward rate because it captures the inflation differential and provides a more accurate forecast of currencies, e
Which of the following is a regulatory approach to solving information problems in insurance markets?
The main (economic) reason for the existence of insurance companies is:
A project has an initial cost of $52,125, expected net cash flow of $12,000 per year for 8 years, and a cost of capital of 12%. What is project's NPV and project payback period?
Is there a conflict between maximizing shareholder wealth and never paying bribes when doing business abroad? If so, how might you explain the firm's position to shareholders asking why the company
The following is the sales budget for Trickle, Inc. for the first quarter of 2009. Compute Sales for November
Suppose monthly revenues in Europe average 10 million Euros and monthly production and distribution costs average 8 million Euro. If the resulting profits are repatriated to the production unit in C
A company has capital of $200 million. It has an EROIC of 9%, forecasted constant growth of 5%, and a WACC of 10%. What is its value of operations? What is its intrinsic MVA? (Hint: Use Equation 13-
Patience Inc. just paid a dividend of n$2.35 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. If investors require an 11 percent r
The coordination of benefits provision reduces the total cost of health insurance by over 10 percent by: