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Assume NEWC has an investment opportunity (similar to the air bag opportunity in Other People's Money).The firm can spend $325 Million on refurbishing its wire and cable plant to develop a product that will be sold in packets or units of twenty. Assume the firm forecasts this product to have the same profit margin (NI available to common stock/sales) as the other products in its product portfolio: ($8.52 per 1,000 individual units) and that margin WACC is 11% for this risk class project product. If the firm's sells the same number of units or packets every year for the next twenty years, how many packets (or units) must be sold each year for this to be zero-NPV project?
1- Assume CF equals net income available to common stockholders plus depreciation. You may assume depreciation is 45,500 per year. Ignore taxes and ignore changes in net operating working capital, along with salvage value of the equipment used in the production process. You should also ignore any potential tax consequences of salvage value. You should use only the information provided and assume it is complete. Hint: CF must be an annuity (annuity of money) or there are hundreds of answers to this question.
2- How would you decide whether (or not) to proceed with this project from a shareholder wealth maximizing perspective? Explain your rationale. What further information if any would you want to have or to know? 2-3 sentences
Suppose our company has a beta of 1.5. The market risk premium is expected to be 9%, and the current risk-free rate is 6%. What is cost of equity using CAPM?
UM Graduation Supplies has debt-to-equity ratio of 80%, profit margin of 10%, total sales of 10 million and total assets of 5 million. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomp..
A treasury bill with 6 days to maturity is quoted at 99.012. What is the bank dicount yeild, the bond equivalent yield, and the effective annual return?
Fama’s Llamas has a weighted average cost of capital of 11 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 9 percent. The tax rate is 40 percent. What is the company’s target debt−equity ratio?
Greener Grass Co. pays a constant annual dividend of $1 a share and has 1,000 shares of common stock outstanding. The company: must always show a current liability on its balance sheet of $1,000 for dividends payable.
What is the feature of a corporate bond that protects the purchaser from moral hazard on the part of the borrower?
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If Bi1= 0.7 and Bi2= 0.9, what is..
Shanken Corp. issued a 18-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. What is the company's total book value of debt? What is the company's total market..
Great Wall Pizzeria issued 8-year bonds one year ago at a coupon rate of 6.1 percent. If the YTM on these bonds is 7.5 percent, what is the current bond price?
Acme incorporated has a debt ratio of .42 non correct liabilities of 20,000 and total assets of 70,000. What is acme's level of current liabilities?
Explain what has happened to current assets and long-term assets. Explain the changes in the liabilities section of the balance sheet.
Assume a stock selling for $44.89 has a dividend yield of 3.1 percent and a PE ratio of 20.1. What are the earnings per share (EPS) for the company?
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