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A firm wants to get their money back ASAP on a project. a) If the company's cost of capital is 10%, what is the discounted payback period on the following project: Estimated cash flows: Time 0 (Today) -$24,000 Year 1 $14,000 Year 2 $13,000 Year 3 $15,000 b) If the maximum allowable discounted payback is 1.5 years, should the company accept the project? SHOW ALL WORK FOR FULL CREDIT.
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 7 years ago for $6 million in anticipation of using it as a warehouse and distribution site, but the company ..
Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure? Its sales are projected to become less stable in the future. The bankruptcy laws are changed i..
One year ago, a bank invested a sum of SEK 1 million in newly issued bonds, denominated in the same currency, with maturity five years hence. The bonds pay a yearly interest coupon calculated at the rate of 5% , and were issued at par. What would be ..
What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.
An 6% semi-annual coupon bond matures in 5 years. The bond has a face value of $1,000 and a current yield of 6.8307%. What is the bond's price? Round your answer to the nearest cent.
The globe Incorporated has EBIT of $20 million for the current year. On the firm balance sheet, there is $80 million of debt outstanding that carries a coupon rate of 8 percent. Investors seek a return of 12 % on the firm, and the firm has a corporat..
While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.35 percent interest per month, compounding monthly, to pay for the car. Analyze the alternat..
How would you set up a cost-benefit analysis of a program to reduce air pollution in a city? Indicate the items you would include as costs and benefits, and discuss the problems encountered in measuring these benefits and costs.
The stock of Cleaning Corp. is currently selling for $25 a share. The company is expected to pay a dividend of $0.75 at the end of this year. If you bought Macbeth stock today and sold it for $29 after receiving the dividend, what rate of return woul..
The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?
Stock A has a beta of 1.30, and its required return is 13.25%. Stock B's beta is 0.90. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.)
A proposed cost-saving device has an installed cost of $630,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $45,000, the margi..
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