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Fun Inc.'s corporate tax rate is 35%. It has 4,000 coupon paying bond outstanding with $1,000 per value, 20-year maturity, and a coupon rate of 7%. The bonds are currently selling for 103% of the par value. The bonds make semi-annual interest payments. Fun Inc. also has 90,000 common shares outstanding, selling for $57 per share. The firm has a market beta of 1.10. Market risk premium is currently 8% and risk-free rate is 6%. The firm is considering a project. This project requires an initial investment of $11.5 million and promises to yield annual earnings of $1.4 million perpetually. Determine whether the firm should take the project using the IRR method. Please show all necessary computation including the WACC and make your conclusion.
Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate
A proposed nuclear power plant will cost $2.9 billion to build and then will produce cash flows of $370 million a year for 15 years. After that period (in year 15), it must
Portfolio Beta You own $1,800 of City Steel stock that has a beta of 1.66. You also own $6,600 of Rent-N-Co (beta = 1.96) and $5,600 of Lincoln Corporation (beta = 1.06). Wh
Your employer has started a new bonus plan for its employees. You will receive a bonus based on lowering the average cost of delivering a service provided by your organizati
The H.R. picket corp has 500,000 of debt outstanding, and it pays an annual interest rate of 10%. Its annual sales are 2 million, its average tax rate is 30% and its profit
Was the offer definite enough to allow Leftkowitz to tender a valid acceptance? Explain your answer using the law you learned. (i.e. If there was a valid offer, explain why
Corporate managers work for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than their own. What strate
Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9% cost capital and is su
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