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The Queensland Land and Cattle Company (QL&CC) is one of the largest cattle-buyers in the country. It has buyers at all the major cattle auctions throughout eastern Australia who buy on the company’s behalf and then have cattle shipped to Longreach, Queensland, where they are shorted by weight and type before being shipped off to feed lots in Queensland. The company has been considering the replacement of its trucks with a newer, more fuel-efficient fleet for some time, and a local Peterbilt dealer has approached the company with a proposal. The proposal would call for the purchase of 10 new trucks at a cost of $100,000 each. Each new vehicle would be depreciated toward a salvage value of $40,000 over a period of five years. If QL&CC purchases the trucks, it will sell its existing fleet of 10 trucks to the Peterbilt dealer for their current book value of $25,000 per unit. The existing fleet will be fully depreciated in one more year but is expected to be serviceable for five more years, at which time the vehicles would be worth only $5,000 per unit as scrap.
Monroe Inc. is an all-equity firm with 500,000 shares outstanding. It has $2,000,000 of EBIT, and EBIT is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equal dividends per share (DPS)..
Diversification refers to the process of:
In expanding the research and knowledge of the ongoing relationship between the United States and China summarize currency market intervention and decide whether this is a useful tool. Explain your rationale. Cite an example of how intervention has b..
Calculating Cost of Preferred Stock. Sixth fourth bank has an issue of preferred stock with a $6.25 stated dividend that just sold for $108 per share. What is the bank's cost of preferred stock?
Assume that a project has a negative net present value of $500 and an internal rate or return of 10%. Is the discount rate used to alculate the NPV higher than, lower than, or equla to 10%? Compare and contrast these two techniques, using this exampl..
A company is using the Profitability Index (PI) when evaluating projects. You have to find the PI for the company's project, assuming the company's cost of capital is 9.5%. The initial outlay for the project is $379,000. The project will produce the ..
Great Advisors requires all its equity analysts to use a two-stage DDM and the CAPM to value stocks. Anabelle, an analyst with Great Advisors, is tasked with valuing SnowWhite Inc. Using historical excess returns of SnowWhite and of the market, she e..
You have been made treasurer for a day at AIMCO, Inc. AIMCO develops technology for video conferencing. A manager of the satellite division has asked you to authorize a capital expenditure in the amount of $10,000. The manager states that this expend..
Multiple changes in cash conversion cycle Garrett Industries turns over its inventory six times each year; it has an average collection period of 45 days and an average payment period of 30 days. Calculate the firm’s cash conversion cycle, its daily ..
A Fifteen, Inc.'s common stock has a beta of 1.4. The risk-free rate is 5.3 percent and the expected return on the market is 9.2 percent. What is the company’s cost of equity capital? Jensen's Travel Agency has a 4.3 percent preferred stock outstand..
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $276,000, has a four-year life, and requires $84,000 in pretax annual operating costs.
ABC Corp. issued a 12 percent, 20 year coupon rate bond 5 years ago. Interest rates are now 8 percent. The par value of the bond is $1,000. Based on semi-annual analysis, what is the current price of the bond?
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