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Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $45 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $19 million. The firm’s tax rate is 40%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 2 decimal places.)
After-tax cash flow $ million
Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,120. If the firm’s tax bracket is 30%, what is its after-tax cost of debt? (Do not round intermediate calculat..
A Treasury bill purchased in December 2015 has 118 days until maturity and a bank discount yield of 2.13 percent. Assume a $100 face value. What is the price of the bill as a percentage of face value?
In each of the theories of capital structure, the cost of equity increases as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, aren't financial managers supposed ..
You are considering the purchase of a common stock whose historical beta is .5. What rate of return should you require from this stock if the current risk free rate of return is 4% and the expected return on an average investment in the market is 11%..
The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $500,000 (including installation costs) and due to efficiency gains, would genera..
A stock has an expected return of 15.5 percent, a beta of 1.50, and the expected return on the market is 12.1 percent. What must the risk-free rate be?
XYZ company has no debt and the cost of equity is 15%. The current value of the firm is $1,000,000 and XYZ can borrow 10%. Assume XYZ pays no tax. Compute the firm value if XYZ borrows $200,000 and uses the proceeds to repurchase shares. Calculate fi..
Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual operating cost will be directly in proportion to the ..
What are the possible consequences if a company uses short-term debt to fund long-term projects, and uses long-term debt or equity to pay current liabilities?
On January 1, 1998, John deposited $ 1000 into Bank X to earn interest at rate i per annum compounded quarterly. On January 1, 2003, he transferred his account to Bank Y to earn interest at rate j per annum compounded quarterly.
Calculate the exercise value of the firm's warrants if the common sells at each of the following prices: Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. ..
jaedan industries has the following account balances as of december 31 2010 found on page 64 amp 65 of the text. the
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