Real estate for capital budgeting purposes

Assignment Help Financial Management
Reference no: EM131348243

1. If a firm has the option of selling some raw land to another firm or utilizing it to build a new factory, then if the firm chose to build the factory how should it handle the lost opportunity to sell the real estate for capital budgeting purposes?

A. Ignore it.

B. Include it as an opportunity cost.

C. Include half of it as additional revenue for the project.

D. Only

2. Which of the following statements is NOT true about the CDS spread?

a) Other things equal, CDS spread should be higher is the recovery rate is higher.

b) Other things equal, CDS spread should be higher if the yield spread of the bonds issued by the reference entity is higher.

c) CDS spreads generally go up when the macroeconomy is bad.

d) CDS spread should be negatively correlated with the stock price of the refence comp.

Reference no: EM131348243

Questions Cloud

Common stocks and long-term bonds are publicly traded : Stark-Arms Co.'s common stocks and long-term bonds are publicly traded. SA's 2 million shares outstanding of common stocks currently trade for $28 per share. SA's long-term debt has a market value of $30 million, a coupon rate of 8% (coupon payments ..
Topics in financial economics-theories and international : In this question we look at the properties of the minimum variance portfolio. Suppose you have the opportunity to invest in three stocks that A, B and C where the standard deviation of returns are given by: s A = 0.15, s B = 0.20, sC = 0.25 and s A..
The interest rate of a one year security : The Interest Rate of a one year security in the United states is 4.5%, while the interest rate on a one year security in Germany is 10.5% If the current exchange rate is E1=1.50 then the future exchange rate in one year according to the international..
Evaluation and outcome expectations in an articulate : Conduct an analysis of a recent article and provide your evaluation and outcome expectations in an articulate and informative paper that discusses:
Real estate for capital budgeting purposes : If a firm has the option of selling some raw land to another firm or utilizing it to build a new factory, then if the firm chose to build the factory how should it handle the lost opportunity to sell the real estate for capital budgeting purposes? Wh..
Consumption of digital media : Students are required to select a topic related to global, social, ethical, or legal issues with digital media. You will perform in-depth research and provide an explanation of how an issue associated with your selected topic relates to the consum..
Determine the mass flow rate of the refrigerant : Determine the mass flow rate of the refrigerant, The system's coefficient of performance, The total power required by the compressor.
Consider a six-month european put option on an index : Consider a six-month European put option on an index. The current index value is $2030, the strike price is $2090, the dividend yield is 2% per annum, and the continuously compounded risk-free interest rate is 6% per annum. The volatility of the inde..
Issue new common stock to finance an expansion : Kelly Corporation will issue new common stock to finance an expansion. The existing common stock just paid a $0.95 dividend, and dividends are expected to grow at a constant rate of 3.35% indefinitely. The stock sells for $51, and flotation expenses ..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Standard deviation rounded to the nearest whole number

A probability of .2 that the return will be 12%; a probability of .35 that the return will be 18%; a probability of .3 that the return will be -10%; and a probability of .15 that the return will be 10%. What is the expected return of this stock? What..

  Deposit ?into an account

You can deposit ?$14,000 into an account paying 15?% annual interest either today or exactly 5 years from today. How much better off will you be at the end of 20 years if you decide to make the initial deposit today rather than 5 years from? today? I..

  An economic indicator is data

An economic indicator is data, usually of macroeconomic scale, used by investors to interpret current or future investment possibilities and to judge the overall health of an economy. Identify and define five economic indicators.

  What will the cash flows for this project be

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,900. What will the cash f..

  What is weight of equity in the company capital structure

A company is thinking about investing in a new project. The balance sheet reports that they currently have $42 million worth of long-term debt and $24 million worth of common equity. They also have 1.2 million shares of stock outstanding and the stoc..

  Combinations of discount rates and times

Compute the present value of a $1,000 cash flow for the following combinations of discount rates and times:

  Calculating present values-annual rate of return

Calculating Present Values [LO2] Suppose you are still committed to owning a $225,000 Ferrari (see Problem 9). If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 3..

  Calculate the present value using discount rate

Calculate the present value using a 10% discount rate: If the discount rate were changed to 11% would you expect PV to increase or decrease? Why? if the initial investment was $10,000, would you do the project? Why/ why not?

  Is this a discount or premium bond

Compute the price of a 4.9 percent coupon bond with 15 years left to maturity and a market interest rate of 7.6 percent. What is the bond price? Is this a discount or premium bond?

  What is default risk premium on the corporate bond

A Treasury bond that matures in 14 years has a yield of 4.33%. A 14-year corporate bond has a yield of 7.39%. Assume that the liquidity premium on the corporate bond is 0.33%. What is the default risk premium on the corporate bond?

  What is the present value of your inheritance

You will receive a $80,000 inheritance in 10 years. You could invest that money today at 9% compounded semi annually. What is the present value of your inheritance?

  What is the amount of the firms disbursement float

Decatur Arts Center writes 158 checks a day for an average amount of $211 each. These checks generally clear the bank 3.5 days after they are written. In addition, the firm generally receives an average of $50,000 a day in checks. The checks that are..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd