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We invest $10 million in a furniture factory. The information we have is as follows. The European Union subsidizes the investment up to 60% of the cost and 40% of the interest. Thus, we borrow $30 million and receive $60 million free money from the EU. The agreement is to pay interest and amortize the principal in the next 10 years. The prognosis of the project’s profitability is that revenue the first ten years will be $20 million per annum, the cost of goods sold will be $3.5 million, the SGA expenses will be $9 million, the interest expense will be $1.8 million annually, and the tax rate will be 20%. Furthermore, the T bond rate is 6%, the bond rate for the furniture company is 11%, the bheta of this firm is 2.5, and the ROR for the stock market has been 12% annually. After the first ten year period, the NCF and the expenses will grow forever at a 4% growth rate. Compute the NCF, COC and NPV
XYZ Inc has a capital structure that consists of 40% debt and 60% common stock. Dividends are growing at a constant rate of 5% and the current dividend is $2.00. The stock is currently selling for $21.88. The before tax cost of debt is 14% and the fi..
A stock has an annual return of 11 percent and a standard deviation of 44 percent. What is the smallest expected loss over the next year with a probability of 1 percent?
TeleMedia is a technology firm that reported an operating loss of $15 million in the most recent year (just ended), after R&D expenses of $100 million. If R&D has a 3--year life and the company’s R&D expenses in the last three years have been $30 mi..
A small shopping center is expected to produce net operating income of $23,880 in year 1. You expect NOI to increase by 4 percent per year over an expected holding period of seven years. Property value is expected to increase by 3 percent per year. T..
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $7.4 milli..
You own a portfolio that is 29 percent invested in Stock X, 44 percent in Stock Y, and 27 percent in Stock Z. The expected returns on these three stocks are 8 percent, 11 percent, and 13 percent, respectively. What is the expected return on the portf..
Construct a pro-forma income statement for next year based on the assumption that sales will grow by 2.0 percent next year - What is the projected free cash flow for December 31, 2015?
Money is invested in a savings account with a nominal interest rate of 2.4% convertible monthly for three years. The rate of inflation is 1.5% for the first year, 2.8% for the second year, and 3.4% for the third year. Find the percentage of purchasin..
Beatrice invests $1,440 in an account that pays 3 percent simple interest. How much more could she have earned over a 4-year period if the interest had compounded annually?
Use Black Scholes to Value the put and call given the following criteria. The stock price six months from the expiration of an option is $13.50, the exercise price of the option is $13, the risk free interest rate is 10 percent per annum, and the vol..
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at..
Assume that a new project will annually generate revenues of $2,300,000 and cash expenses (including both fixed and variable costs) of $700,000, while increasing depreciation by 170,000 per year. In addition the firm’s tax rate is 33%. Calculate the ..
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