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Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. Risk-adjusted WACC 10.0% Net investment cost (depreciable basis) $65,000 Straight-line depr. rate 33.3333% Sales revenues, each year $63,000 Annual operating costs (excl. depr.) $25,000 Tax rate 35.0%
Even if the five banks provided the same effective annual rate, would a rational investor be indifferent between the banks? Explain.
You have found a project that will produce an annual income of $125,000 at the end of first year. This annual income will increase by 5 percent annually for 7 years. What is the value of this project in today's dollars if you can earn 12% on your inv..
You have recently been hired by Low Depot, Inc. (LDI) in its relatively new treasury management department. LDI was founded eight years ago by Joe Lowe. Joe found a method to manufacture a cheaper battery operated saw that will hold a larger charge. ..
Extra Co. maintains a debt-equity ratio of 1 and has a tax rate of 40 percent. The firm does not issue preferred stock. The cost of equity is 12 percent and the before tax cost of debt is 15 percent. What is Abco’s weighted average cost of capital?
Which of the following rules is CORRECT for capital budgeting analysis? The interest paid on funds borrowed to finance a project must be included in estimates of the project’s cash flows.
You are planning your retirement in 10 years. You currently have $179,000 in a bond account and $619,000 in a stock account. You plan to add $6,100 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..
Super Growth Fund had $250 million assets at the start of the year with 10 million shares outstanding. It also had $10 million in liabilities. By the end of the year, Super Growth Fund has grown its assets to $500 million and paid off all liabilities..
Consider a call option for an asset with the following parameters. Determine the terminal distribution of the asset price (use binom.dist function in excel). describe the distrubtion (mean, standard deviation, shape). Draw the payoff diagram (not pro..
Which of the following help firms determine the actual implementation of their distribution policy? Which of the following uses is considered a good use of free cash flow? A company invests 15% of its FCF in marketable securities. This makes it diffi..
Dog Up! Franks is looking at a new sausage system with an installed cost of $455,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $65,000. If the ta..
The faraway moving company is in a major plant of expansion that involves the expenditure of $211 million in the coming year. The firm plans on financing the expansion through retension of $140 in firm earning and borrowing the remaining $71 million.
What is the beta of your portfolio
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