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Hickock Mining is evaluating when to open a gold mine. The mine has 50,400 ounces of gold left that can be mined, and mining operations will produce 6,300 ounces per year. The required return on the gold mine is 12 percent, and it will cost $34.3 million to open the mine. When the mine is opened, the company will sign a contract that will guarantee the price of gold for the remaining life of the mine. If the mine is opened today, each ounce of gold will generate an aftertax cash flow of $1,430 per ounce. If the company waits one year, there is a 60 percent probability that the contract price will generate an aftertax cash flow of $1,630 per ounce and a 40 percent probability that the aftertax cash flow will be $1,330 per ounce. What is the value of the option to wait?
In January 2015, Yahoo announced a plan to spin off tax-free its nearly $40 billion of holdings in Alibaba. Discuss advantages and disadvantages of a spin-off from the standpoints of both the company and its investors.
You are the chief financial officer of Donnelly Industries. On multiple occasions, you have engaged in insider trading but have never been able to earn any abnormal returns. Which form of market efficiency most likely exists given your situation? If ..
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. What is the maximum monthly ch..
Which one of the following statements about a limited partnership is correct?
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from toda..
Yale Stores had a beginning accounts payable balance of $56,900 and an ending accounts payable balance of $62,800. Sales for the period were $670,000 and costs of goods sold were $418,000. What is the payables turnover rate?
What is the expected return for the project? If the required rate of return is 13%, should they proceed with the project? Why? Does this mean Project B is automatically eliminated from consideration?
Your company has a debt to equity ratio equal to 2.5 and a constant debt policy. The company's debt is risky with a beta equal to 0.1, and the market cost of debt is 3%. The corporate tax rate is 15%, the risk free rate is 1% and the return on levere..
Suppose the 0.5-year zero rate is 6% and the 1-year zero rate is 8%. Consider a 1-year, plain vanilla, semi-annual pay, fixed-for-floating interest rate swap. What is the swap rate that will make this swap worth zero?
Do you believe that corporate takeover defenses are more motivated by the target's managers attempt to entrench themselves or to negotiate a higher price for their shareholders? Illustrate your points with real life situations.
What is the coupon rate and year of maturity for the Medtronic and Morgan Stanley bonds? How much would you have had to pay to buy one Anheuser Busch Inbev Worldwide bond at the closing trade?
Leverage magnifies losses associated with declines in asset values but not with gains in asset values. This asymmetry is why bank regulators have outlawed leverage by banks that benefit from FDIC insurance.
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