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Downhill Pizza, located near the Sugarloaf ski area, makes Tuscan style “homemade” pizza which it freezes and distributes throughout the northeast. It is considering a new more efficient pizza oven with a larger capacity. The installed cost will be $350,000. This cost will be depreciated straight line over its five year life to a zero salvage value as determined by the IRS (there is no half-year convention with straight line depreciation). However, the firm plans to sell the oven in four years (at t = 4) for $80,000. The oven will save the firm $130,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $28,000 which will be returned to the firm at the end of the project (at t=4). There are no other net working capital changes. If the tax rate is 28% and the project discount rate is 14%, what is the NPV of this project?
The 8% bonds of a company are currently selling at $1027. These bonds have 16years left until maturity. What is the current yield?
Input area: Settlement date 10/30/05 Maturity date 10/30/15 Coupon rate 9% Coupons per year 2 Face value $1,000 Yield to maturity 6%. Find Price. Find discount or premium?
Preferred Products has issued preferred stock with an annual dividend of $5.90 that will be paid in perpetuity. A. If the discount rate is 10% at what price should the preferred sell? Current price? B. At what price should the stock sell 1 year from ..
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $13007, which will be depreciated straight-line to zero over its four-year life. what is the project’s average acc..
A CFO rejects the idea of a company going private, believing that a large share repurchase program funded by issuing long-term debt would please the shareholders and raise the stock price. What would be an argument against the CFOs belief? And what i..
ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. Artie's Soccer Ball Company is considering a p..
Your Grandma left you $13,500 in her will. if you depsit the money today at a 6.00% annual rate of interest, how will this deposit be worth in 10 years with monthly compounding (not counting taxes, ect.) Please answer with a formula
Suppose you sell a fixed asset for $50,000 when its book value is $60,000. If your company's marginal tax rate is 40%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
According to the Capital Asset Pricing Model (CAPM), what determines the amount of reward an investor receives for bearing the risk associated with an individual security? Explain in detail why those things are the determinates.
This year Andrews achieved an ROE of 6.2%. Suppose the Board of Directors of Andrews mandates that management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, what..
A stock has an expected return of 10.5 percent, its beta is 1.15, and the risk-free rate is 5 percent. What must the expected return on the market be? (Do not round intermediate calculations and round your final answer to 2 decimal places.
If a stock's beta increases, with no other changes, what should happen to the price of the stock? You find a stock that just paid a dividend of $1.50 that is expected to grow at 6%. If the required return on the stock is 11%, what should be the price..
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