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What types of firms need to estimate industry asset betas? How would such a firm make the estimate? Describe the process step by step.
Flotation costs for issuing new common stock are 8 percent, for new preferred stock, 7 percent, and for new debt, 2 percent. The true initial cost figure Southern should use when evaluating its proj
The one-year interest rate is 10 percent. Next year, there is a 45 percent probability that interest rates will increase to 12 percent, and there is a 55 percent probability that they will fall to 6
A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. The interest rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of .5. If you use a co
If Kelly acquires Reilly, it will increase the debt to 60%, at an interest rate of 9.50%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 5%. Wha
The primary difference between a forward contract and a futures contract is the: time of delivery
The project is estimated to generate RM2,050,000 in annual sales, with costs of RM950,000. The tax rate is 35% and the required rate of return is 12%. What is the project's net present value?
Woidtke Manufacturing's stock currently sells for $20 a share. The stock just paid a dividend of $1.00 a share (i.e., D0 = $1.00), and the dividend is expected to grow forever at a constant rate of
Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept-reject decision for each.
Imagine you are a new retailer on a small scale in your neighborhood. Create a four-to- six step plan on how you would manage your finances while ensuring you work your merchandise plan.
Calculate each project's payback period, net present value (NPV), and internal rate of return (IRR). Which project (or projects) is financially acceptable? Explain your answer.
If Touring Enterprises were to increase the percentage of debt in its capital structure, what would happen to the WACC ? No calculation is necessary- simply provide a short, non-numeric response. I
Suppose you can only afford a monthly mortgage payment of $2,600 per month, would you purchase this house, if the interest rate increases to 7% per year? Explain.
You are considering purchasing a put option on a stock with a current price of $33. The exercise price is $35, and the price of the corresponding call option is $2.25. According to the put-call pari
The firm has a tax rate of 35 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $300,000 at the beginning of the project. What will be the net
Redan Manufacturing uses 2,400 switch assemblies per week and then reorders another 2,400. The relevant carrying cost per switch assembly is $9.50, and the fixed order cost is $1,200. What is the c
You are considering a new project. The project has projected depreciation of $720, fixed costs of $6,000, and total sales of $11,760. The variable cost per unit is $4.20. What is the accounting brea
The cost of the project will be 7,125,00. It will result in additional cash flows of 1,875,00 for the next eight years. the discount rate is 12 percent. What is the payback period? What is the npv f
The equivalent stock position (ESP) represents the number of shares of the underlying stock if all option positions were converted into stock at their current values and added to the shares of stoc
Why is bank lending to large corporations more difficult than making loans to small or mid-size firms? What additional factors are involved? Do banks have some additional tools to help in assessing
List the three steps that make up the general approach to capital budgeting.
The appropriate market capitalization rate for unleveraged cash flow is 10% per year, and the firm currently has debt of $3 million outstanding. Use the free cash approach to value the firm s equity
Calculate the coefficient of variation for each alternative. If the firm wishes to minimize risk , which alternative do you recommend? why?
Consider how economic conditions affect the default risk premium. Do you think the default risk premium will likely increase or decrease during the next 6 months?
What Dustvac s pre-merger WACC? What discount rate should you use to discount Dustvac s free cash flows and interest tax savings? What is the value of Dustvac s equity to Magiclean?