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Kwik Dogs is considering the installation of a new computerized pressure cooker that will cut annual operating costs by $18,400. The system will cost $42,900 to purchase and install and will be depreciated to zero using straight-line depreciation over its 4-year life. What is the amount of the earnings before interest and taxes for this project? please show calculations and formulas.
Large Industries bonds sell for $1,121.79. The bond life is 13 years, and the yield to maturity is 6.3%. What must be the coupon rate on the bonds? Assume coupons are paid once a year and the face value is $1,000.
Gruber Corp. pays a constant $8.00 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price?
Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four. Does this change have an impact on their decision?
You purchased a machine for $1.06 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $779,000, what is y..
Calculate the Weighted Average Cost of Capital given the following information: Target capital structure: 60 percent stock, 30 percent debt, 10 percent preferred stock ; cost of equity is 12 percent; cost of debt is 7 percent; cost of preferred stock..
Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares o..
A firm has a retention ratio of 49 percent and a sustainable growth rate of 7.80 percent. The capital intensity ratio is 1.73 and the debt-equity ratio is .84. What is the profit margin?
Joe and Co., an online options broker, is an all equity firm with 60,000 shares of stock outstanding at a market price of $50 a share. The company has earnings before interest and taxes of $87,000. How many shares of stock will you continue to own if..
Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000 and returns after-tax cash inflows of $7,000 per year for ten years. The firm has a maximum acceptable payback period of eight years. Determine the..
A project currently generates sales of $11.5 million, variable costs equal to 40% of sales, and fixed costs of $3.5 million. The firm’s tax rate is 35%. What are the effects on the after-tax profits and cash flow, if sales increase from $11.5 million..
The following two investment options are viewed under an annual effective interest rate of i. Investment A is a a 10-year zero coupon bond which redeems at par-value 250. Investment B is a perpetuity-immediate paying an annual payment starting with 4..
You want to buy a $500,000 house and you have two options for a mortgage: What would be the effective borrowing cost on the two loans if you want to hold the mortgages to maturity? Which one do you prefer? (In other words, which one has the lowest ef..
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