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Growth Enterprises believes its latest project, which will cost $84,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $9,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 4%.
a. If the discount rate for this project is 10%, what is the project NPV?
b. What is the project IRR?
Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. What is the firm's weighted..
A firm has access to two mutually exclusive investment projects. Both the projects require an initial investment of $15,000. If project 1 is undertaken, with probability 1/2, it pays off $20,000 or $34,000. What are the expected payoffs to the bank a..
Which one of the following actions is indicative of a restrictive short-term financial policy?
Assume that you are the CFO of a non-tax paying hospital that is considering opening a pediatric unit. Based on your research, you expected the following: The cost of new equipment for the unit is $4 million. The equipment has a 10 year useful life a..
If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Calculate all MCC break points for the following information: What determines whether to use the dividend growth model app..
One of the most important operating expenses for the Olde Virginia Brick Company is natural gas, which is used to bake and dry the bricks. Natural gas prices have recently been quite volatile, now approaching $6 per mcf. If Olde Virginia does not hed..
Suppose you own 3,000 common shares of Laurence Incorporated. The EPS is $8.00, the DPS is $4.25, and the stock sells for $90 per share. Laurence announces a 2-for-1 split. Immediately after the split, how many shares will you have? What will the adj..
One year ago, the Chinese e-commerce company Alibaba Group floated its shares in the biggest Initial Public Offering in US history. Alibaba Group priced its shares at $68 raising $21.8 bn and valuing the company at $167.6 bn. What is the payout ratio..
Sqeekers Co. Issued 15pyear bonds a year ago at a coupon rate of 4.1 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 4.5 percent, what is the current bond price?
Perry Bell paid $6,438 of state and local property tax this year. Compute the after-tax cost of these payments assuming: a. Perry doesn't itemize deductions on his Form 1040. b. Perry itemizes deductions, has a 33 percent marginal tax rate on regular..
The Toy Chest pays an annual dividend of $4.80 per share and sells for $93.20 a share based on a market rate of return of 15 percent. What is the capital gains yield?
What is the purpose of outsourcing? How can it be helpful to a company's growth? How can it be harmful? Give examples to support your answer.
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