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Winston’s has 18,000 shares outstanding with a book value of $348,000 and a market value of $501,660 and has net income of $21,000. The firm is considering a project with a net present value of $4,500 that would require the purchase of $175,000 of fixed assets. The project would be financed through the sale of equity shares. The price-earnings ratio of the project equals that of the existing firm. What will the new market value per share be after the project is implemented?
Tom tells Bob that he will pay Bob $5,000 to put a cherry bomb in his gas tank so that Tom can collect money from the insurance policy on a new, cherry red sports car. If Bob carries out Tom’s wishes and places a cherry bomb in the gas tank of Tom’s ..
You have the following bond: $10,000 par value, Coupon of 8.5%, semi-annual compounding, Maturity of 13 years, MKT Rate of Interest of 11.65%. Bond is callable in 6 years with a Call Premium of $500. What is the Nominal Yield to Call?
Project Parameters Capital Investment $1,675,000 Life 6 years Depreciation S/L to $0 Projected Unit Volume 91,000 Unit Variable Cost $21.40 Unit Price $35.95 Annual Fixed Costs $775,000 Tax Rate 35% Required Return 11% Questions 1. Suppose unit sales..
Theresa’s Flower Garden has 750 bonds outstanding that are selling for $989 each, 2,500 shares of preferred stock with a market price of $47 a share, and 30,000 shares of common stock valued at $56 a share. What weight should be assigned to the commo..
What is the required rate of return on a preferred stock with a $50 par value, a stated dividend of 7% of par, and a current market price of (a) $70, (b) $83, (c) $117, and (d) $145 (assume the market is in equilibrium with the required return equal ..
Which of the following will increase the WACC of a firm?
You are purchasing a home for $200,000 with a 20% down payment. You will pay 6% interest, for a 15 year loan. How much is your payment for the home (insurance is $60 per month and taxes are $85 per month.) What is your principle, interest and balance..
Blue water system is analyzing a project with the following cash flows. use the reinvestment approach and calculate the modified internal rate or return if the discount rate is 15%?
A mutual fund manager expects her portfolio to earn a rate of return of 9% this year. The beta of her portfolio is .8. Assume rate of return available on risk-free assets is 2% and you expect the rate of return on the market portfolio to be 12%. Calc..
An engineer planning for his retirement thinks that the interest rates in the marketplace will decrease before he retires. Therefore, he plans to invest in corporate bonds. How much should he be able to sell the bond for in 5 years if the market inte..
Stanley Roper has $2,200 that he is looking to invest. His brother approached him with an investment opportunity that could give Patrick $4,600 in 4 years. What interest rate would the investment have to yield in order for Stanley’s brother to delive..
You are evaluating two different silicon wafer milling machines. The Techron I costs $271,500, has a three-year life, and has pretax operating costs of $45,100 per year. The Techron II costs $372,500, has a five-year life, and has pretax operating co..
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