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Digital Organics (DO) has the opportunity to invest $1.03 million now (t = 0) and expects after-tax returns of $630,000 in t = 1 and $730,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity financing, the borrowing rate is 7%, and DO will borrow $330,000 against the project. This debt must be repaid in two equal installments. Assume debt tax shields have a net value of $0.20 per dollar of interest paid. Calculate the project’s APV. (Do not round intermediate calculations. Rounddown your answer to the nearest whole dollar.)
Adjusted present value $
Lee Holmes deposited $15,900 in a new savings account at 6% interest compounded semi annually. At the beginning of year 4, Lee deposits an additional $40,900 at 6% interest compounded semi annually. At the end of 6 years, what is the balance in Lee’s..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend 10 years from today ..
A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $3 per share (D1= $3), and it is expected to grow at some constant rate g throughout time. What is the required rate of return on a preferred stock with a $50 p..
The IRS is revaluating the asset life categories used for ACRS depreciation. The trucks that JK Industries use are currently classified by the IRS as having an asset life of 7 years. Because these trucks actually last for 10 years, the firm’s manager..
Suppose a firm pays total dividends of $330,000 out of net income of $2.8 million. What would the firm's payout ratio be?
Enterprises originally sold bonds in 2011 with a 15 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate. What price would bond investors be will..
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and $10.00 million for trucks..
A tourist from the United States wants to purchase a painting in Mexico City. The price of the painting was 5,927 pesos plus a shipping charge of 387 pesos to send the painting to the tourist's home. Warm Winters Linen, Inc. had ending inventory this..
You purchase a bond with a coupon rate of 8.7 percent and a clean price of $870. If the next semiannual coupon payment is due in two months, what is the invoice price?
PK Software has 8 percent coupon bonds on the market with 23 years to maturity. The bonds make semiannual payments and currently sell for 109.25 percent of par. What is the effective annual yield?
The faster you pay off of mortgage, the more you save on interest; this is one of the advantages of paying off a loan earlier. Yield to maturity reflects the current market rate and it is the appropriate discount rate that matches the present value o..
The price elasticity of demand is: The demand curve for physician office visits is quite inelastic; therefore, a:
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