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Blue Water Systems is analyzing a project with the following cash flows. The cash flows, in order, are -$236,000 (initial cost), $137,400 (year 1 CF), $189,300 (year 2 CF) and -$25,000 (year 3 CF). Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not?
TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $1.5 million and there are 120,000 shares outstanding. If the benchmark price–sales ratio is 4, what is your estimate of an appropriate stock price. What i..
Compare the variables in the binomial model with those in the black-scholes-mertion model. Note any differences or similarity and explain
Different companies have different financial ratios. So Return on Equity for any one company is the product of three ratios which may be quite different in value than the same three ratios for a different company.
Smith Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 12%. If smith has 65 million shares..
Warner associates are forecast to grow by 100% in the first year and 50% in the second year. Afterward, it will grow by a rate that is known only indirectly. Its ROE is .2 and its retention rate is 30%. Furthermore, its unlevered beta is 1, tax rate ..
Ethier Enterprise has an unlevered beta of 1.15. Ethier is financed with 40% debt and has a levered beta of 1.65. If the risk free rate is 6.5% and the market risk premium is 5%, how much is the additional premium that Ethier's shareholders require t..
Provide one reason for using the bank's investment portfolio to speculate on interest rate movements. Provide one reason against such a strategy. What do you believe about efficient markets, and how does this influence your opinion of speculating? Ca..
Assume Sparkle Co. expects to sell 150 units next month. The unit sales price is $90, unit variable cost is $35, and the fixed costs per month are $5,000. The margin of safety
A firm is determining its cost of common stock equity. It last paid a dividend of $.52, the dividends are growing at 5%, flotation costs are $2 per share and the firm will net $72 per share upon the sale of the stock. What is the firm’s cost of commo..
Name and describe the three functions of managerial finance. For each, give an example other than those used in the text and lecture.
What is the future value of $12 deposited today in 5 years when earning 6% simple rate of interest?
Your real estate agent mentions that homes in your price range require a payment of approximately $1,200 per month for 30 years at 12% (APR) interest. The first payment will be made at the end of the third year (month 36), and the total number of pay..
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