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HFX Ltd. has the opportunity to undertake the following project: The project requires an immediate $1,000,000 investment in equipment that will be added to an ongoing asset pool with a 20% CCA rate. The project will have a total life of 10 years. Net working capital will increase by $250,000 immediately. An additional working capital investment of $100,000 will be required at the time the equipment is maintained at the end of year 5. The working capital will be freed up at the end of the project. This new equipment will generate $500,000 in additional cash sales and will cost $120,000 for cash expenses each year. These sales and expenses will continue for ten years. At the end of the tenth year the project will end and the equipment will be sold. The market value of the equipment then is expected to be $200,000. HFX Ltd. has a 44% tax rate and a 12% cost of capital. Determine the project's NPV. Should HFX accept or reject the project?
A firm’s dividends have grown over the last several years. 10 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm? Round answer to two decimal places.
Examine the credit card loss rates and personal bankruptcy filings in Exhibit 15.4. What might explain the increase in both measures after 1994 in a period when economic growth in the United States was strong and unemployment was low? Given the probl..
A company has $6.90 per unit in variable costs and $4.60 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.50, what price should be charged if 58.000 units are expected to be sold?
The Strik-it-Rich Gold Mining Company is contemplating expanding its operations. To do so it will need to purchase land that its geologists believe is rich in gold. Strik-it-Rich’s management believes that the expansion will allow it to mine and sell..
Table 3.5 presents a computer spreadsheet for estimating R&E Supplies external financing required for 2015. The text mentions that with modifications to the equations for equity and net sales, the forecast can easily be extended through 2016. Write t..
Compute after-tax cash flow to the Daily Planet from this investment (in reals) - What is the present value of the depreciation-related cash flow?
Ward Corp. is expected to have an EBIT of $2,350,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $174,000, $103,000, and $124,000, respectively. What is the price per share of the company's st..
The Wei Corporation expects next year's net income to be $20 million. The firm's debt ratio is currently 40%. Wei has $15 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual dis..
Laverne Industries stock has a beta of 1.44. The company just paid a dividend of $.94, and the dividends are expected to grow at 5.4 percent. The expected return of the market is 11.9 percent, and Treasury bills are yielding 5.4 percent. The most rec..
Are dividends relevant in determining share values? Identify one factor that indicates they are, and one that indicates they are not. Give your opinion on this question and why you hold it. Select one of the following theories and provide an argument..
The challenge of global promotion is not simply to communicate across culturally diverse country markets, but to also achieve integrated marketing messages among the different media forms used to reach targeted customers.
Mega stock is expected to grow at 11% in year 1 and year 2, 10% in year 3, 8 % in year 4 and then grow at a constant rate of 4% in the years that follow. The required rate of return (Rs) equals 7%. The company will pay a Dividend at the end of year 1..
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