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Assume the alpha company is considering producing a new widget. the required machinery will cost 1,200,000 it will be depreciated using a 5-year macrs asset life. alpha has already spent 250,000 in renovations to make room for the new machinery(expensed in 1 year) apha expects to sell 150,000 widgets each year for the next 4 years at a 12 sale price per unit and a $5 varaable cash cost per unit. 20% of the sales will come from customers of alphas existing widget, which sells for $10 per unit and has a $6 varaible cash cost per unit. aplha will incur $60,000 in fixed cash operating costs each year. alpha expects to sell machinery at the end of year 4 for 150,000 the companies tax rate is 30% and relevant cost of capital is 20%
You bought one of Bergen Manufacturing Co.’s 7 percent coupon bonds one year ago for $1,045. These bonds make annual payments and mature twelve years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 6 per..
8% coupon bonds with face value of $1000 that mature in 10 years. These bonds have a yield to maturity of 6%. There are 250,000 of these bonds. What is the cost equity for Donuts R Us? What is the bond value of the 8% coupon bonds outstanding? What a..
Skillet Industries has a debt–equity ratio of 1.5. Its WACC is 9 percent, and its cost of debt is 5.5 percent. The corporate tax rate is 35percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capital?
A 68 year old taxpayer has $20,000 in social security income and on other taxable or tax-free income, how much of the social security income must the taxpayer include in taxable income?
Compute the fair value of an American call option with strike K=110 and maturity n=10 periods where the option is written on a futures contract that expires after 15 periods. The futures contract is on the same underlying security of the previous que..
Your firm has an average collection period of 53 days. Current practice is to factor all receivables immediately at a 2 percent discount. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.
Outdoor Sports is considering adding a miniature golf course to its facility. The course would cost $138,000, would be depreciated on a straight line basis over its 5-year life, and would have a zero salvage value. The project will require $3,000 of ..
You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a treasury bill with a rate of return of 5%. How much money should be invested ..
You are an outdoor concert manager that is evaluating whether to have an outdoor concert in Boston in April. The weather can be either good or bad, and the turnout for the concert can be either high or low. What is the probability that there is a low..
Heath Foods' bonds have 7 years remaining to maturity. The bonds have a yield to maturity of 8% and have a 9% coupon rate. What is the current yield? Nungesser Corporation has issued bonds that have a 9% coupon rate, mature in 8 years and a yield to ..
A stock is currently selling for $50 a share. The stock is not expected to pay any dividends over the next 3 years. The annual risk-free rate with continuous compounding is 5%. Find the three-year forward price for the stock.
Fido's Dog Spa's financial statements show that its total assets equal $100,000, its return on assets is 3% and its return on equity is 5%. Compute the company's net income. What portion of total assets is financed with dept?
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