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A company XYZ is considering manufacturing a product in space. The project lifetime is 10 years and has the following consecutive phases: Phase 1 (years 1 to 3): The engineering design and development requires 3 years. No production is done during this period Phase 2 (years 4 to 10): to launch the spacecraft into orbit, operate the equipment Phase 2 of the project has the following costs, all paid at the end of each year: Launch $7300000 Insurance $640000 Labor $1500000 Material $600000. The minimum attractive rate of return is i=25%If the annual net cash flow of phase 2 is $5300000 per year, what is the present value of the net cash flow when evaluated at the beginning of phase 2 (year 4)? Note that phase 2 is 7 years. Enter the answer in whole value
A bond has a coupon rate of 3.25%, pays coupons semiannually, and has a maturity of 10 years. If the yield to maturity is 3.50%, calculate the current cost of a bond with a par value of 100. What is the current yield on the bond? What would be the va..
Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $16 million in invested capital, has $2.4 million of EBIT, and is in the 40% federal-plus-state tax bracket. Calculate the return on inve..
Vandelay Industries is evaluating a project that costs $1,350,000 and has a 20 year life. Depreciation will be straight-line to zero over the life of the project. Management believes they will be able to sell the equipment at the end of the project f..
Two projects being considered by Greenwood Resources Company are mutually exclusive and have the following projected cash flows. The firm's cost of capital is 8 percent. Calculate each project's payback. If you apply payback criterion, which investme..
Ume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1. What is requi..
Marking to market is a process that. Considering a put option, an increase in the strike price: At expiration, the time value of an option:
Give an example of where a merger or acquisition did not produce the anticipated results originally desired. Briefly describe why it failed and what lessons can be learned from its failure?
Firm A is acquiring Firm B for $25,000 in cash. Firm A has 3,000 shares of stock outstanding at a market value of $21 a share. Firm B has 1,200 shares of stock outstanding at a market price of $17 a share. Neither firm has any debt. The net present v..
Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 8%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $30.50, its dividend is expected t..
ATL Constructions is trying to determine the optimal level of short term financing for its working capital requirement. You are asked to provide an analysis on the three key factors that the company should consider in selecting different sources of s..
Given the following information for XYZ Co., you want to find the cost of capital (WACC). The firm’s tax rate is 40%. Ignore all the flotation cost. Debt: 8,000 7% coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 98% of p..
You own a bond with the following features: 9 years to maturity, face value of $1000, coupon rate of 2% (annual coupons) and yield to maturity of 1.1%. Just after you purchase the bond, the yield to maturity rises to 5.4%. What is the capital gain or..
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