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Quick Computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of these improved chips at a price of $25 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 3 million per year. The old chip costs $6 each to manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? (Enter your answer in millions.)
Cash flow $ million
You have $100,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15% and Stock Y with an expected return of 10%
A share of stock with a beta of 0.85 now sells for $70. Investors expect the stock to pay a year-end dividend of $2. The Treasury bill rate is 2 percent and the market risk premium is 5 percent. If the stock is perceived to be fairly priced today, wh..
Titan Mining Corporation has 9.3 million shares of common stock outstanding and 370,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $41 per share and has a beta of 1.15, and the bonds have 20 ye..
Carter's Home Supply has a $35 million bond issue outstanding with a coupon rate of 8.5 percent. The tax rate is 38 percent. What is the present value of the tax shield?
The real risk-free rate is 4%. Inflation is expected to be 2% this year and 4% the next two year. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?
(leverage and EPS) You have developed the following pro forma income statement for your corporation: If sales should increase by 25 percent, by what percent would earnings before interest and taxes and net income increase. If sales decrease by 25 per..
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.47 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio?
The Swiss franc (CHF) is currently trading in the spot market at $0.5800/CHF. The 180-day forward rate is $0.5743/CHF. The U.S. Treasury bill rate for 180 days is 3.1 percent in the United States. What do you expect is the 180-day Swiss government se..
What are the values of the output and the interest rate in 1999 when the money supply is 900? Sketch the AD curve and show what happens when the money supply is decreased below 900 in 1998.
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $15.30 for each of the 15 million shares sold. The initial offering price was $18.00 per share, and the stock rose to $20.10 per share in the first few minutes of t..
Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. Calculate Boehm’s total dividends for 2014 under each of the following policies: 1. (a..
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