Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 10% pref..
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A firm forecasts a project's net cash flows ($millions) in years 1 thru 4 as $120, $130, $135, and $137, respectively. If the project ends at the end of the fourth year, what is the horizon value of the project? Assume that the company had a historic..
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S. Girard Inc. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower cost..
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Recently, More Money 4 U offered an annuity that pays 4.8% compounded monthly. If $1,696 is deposited into this annuity every month, how much is in the account after 6 years? how much of this is interest?
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Microsoft declared a dividend for the first time in 2003. a) What goes into the decision of a company to initiate a "regular" dividend? Some terms that come to my mind: profitability, taxes, capital structure, psycological impact, etc. b) And for a "..
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Carraway seed company is issuing a $1000 par value bond that pays 7% annual interset and matures in 15 years. Investors are willing to pay $850 for the bond. Flotaion costs will be 3% of market value. The company in in a 30% marginal tax bracket. Wha..
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Farah Snack Co. has earnings after taxes of $150,000. Interest expense for the year was $20,000; preferred dividends paid were $20,000; and common dividends paid were $30,000. Taxes were $22,500. The firm has 100,000 shares of common stock outstandin..
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A stock is currently priced at $43. The stock will either increase or decrease by 20 percent over the next year. There is a call option on the stock with a strike price of $40 and one year until expiration. If the risk-free rate is 2 percent, what is..
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Portfolio Required Return Suppose you manage a $4.105 million fund that consists of four stocks with the following investments: Stock Investment Beta A $240,000 1.50 B 475,000 -0.50 C 1,140,000 1.25 D 2,250,000 0.75 If the market's required rate of r..
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The textbook Investment Analysis and Portfolio Management (10th edition), by Frank Reilly. enumerates five sources of risk. If you are investing globally, which of these five sources can be both a risk and a potential benefit? Briefly explain your re..
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A 100,000 loan agreement has payments and inputs as follows. Calculate the XNPV, XIRR, NPV and IRR of the resulting cash flows Item Notes Initial Cash Flow (PV) 10,000.00 Start Date 01-Jan-2008 Interval (Months) 6 Year One 1,000.00 Year Two 1,500.00 ..
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John’s portfolio consists of $1000 in XYZ stock and $4000 in ABC. Historically XYZ has had an average return of 16% annually with a standard deviation of 30%. Historically ABC has an average return of 24% annually with a standard deviation of 40%. Wh..
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