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Montilus Products Inc. is considering the purchase of a new machine, which will reduce manufacturing costs by $15,000 annually. Montilus will use the MACRS accelerated method to depreciate the machine (5-year MACRS class life), and it expects to sell the machine at the end of its 6-year operating life for $10,000. The firm expects to be able to reduce net operating working capital by $12,000 when the machine is installed, but required working capital will return to the original level when the machine is sold after 6 years. Montilus's marginal tax rate is 40 percent and it uses a discount rate of 12 percent to evaluate projects of this nature. If the machine costs $50,000 what is the project's NPV and IRR?
Your portfolio allocates equal funds to the DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 11 percent and 40 percent, respectively. What is the smallest expected loss for your portfolio in the coming mont..
You are a researcher at Brave New World Interactive Communications Company. Sales to homeowners of the remote-controlled security system (using the new gesture-recognition microchip) have dropped 40% in the last quarter. Determine what type of inform..
Billy’s Exterminators, Inc., has sales of $752,000, costs of $312,000, depreciation expense of $64,000, interest expense of $42,000, a tax rate of 35 percent, and paid out $57,600 in cash dividends. The firm has 120,000 shares of common stock outstan..
Suppose you borrow $50000 when financing a coffee shop which is valued at $75000. You expect to generate a cash flow so $84000 if demand is as expected. The cost of debt is 4%. What should the value of equity be?
For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision. What is the best way to select a p..
Darby Minerals wants to hire an investment banker to sell 2 million shares of stock to the public. Darby is considering using either a firm commitment or a best efforts offering. Why are mutual funds popular with individual investors?
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 8%, and a tax rate of 40%. What is the company's expected g..
A 15-year, semi annual coupon bond is priced at $1,102.75. The bond has a $1,000 face value and a yield to maturity of 5.33 percent, and was issued 3 years ago. What is the coupon rate on the bond?
Determine the measures for 2012, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Assume 365 days a year.
Young's free cash flow during the just-ended year (t=0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the value of the firm's operations?
Which of the following is not a direct cost of bankruptcy?
You are 22 year old today. You want to retire at age 55 and have $3 million at that time. Assume you can earm an average annual rate of return of 8.8 percent.
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