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Decision tree analysis shows a project to have several possible outcomes the best of which has an NPV of $12M calculated over a five-year life. This best case path has an overall probability of occurring of 20%. A real option is available at an initial cost of $800,000 which will add a single $6M cash inflow to this best case path at its end. The option doesn't have a significant effect on the project's risk. What is the option's value? The company's cost of capital is 12%.
a. ($3,404)b. $2,604,000c. ($119,000)d. $274,000
Consider a capital expenditure project with an expected 10-year economic life and forecasted revenues equal to $40,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment's estimated salvage value at the end of the project is $9000. The equipment's $23,000 cost will be depreciated using MACRS depreciation (7-year asset). The project requires a $7,000 working capital investment in year 0 and another $5,000 in year 5. The company's marginal tax rate is 40%. Calculate the expected net cash flow in year 10 of the project.a. $32,000b. $27,000c. $24,000d. none of the above
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Computing annuity payment: John Harper has borrowed $43,000 to pay for his new truck. The annual interest rate on the loan is 4.5 percent, and loan needs to be repaid in five years. What will be his annual payment if he begins his payment beginning..
Suppose that a fifteen year, $1,000 face value bond pays interest of $37.50 every 3 months. If you require a nominal annual rate of return of 12%, with quarterly compounding,
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If you were underwriting new issues to small firms and you had a recent offering on a company that had the following terms: Price to public $5 per share, Number of shares 3,000,000, Proceeds 14,000,000
Gordon company issued $1,000,000 10 year bonds and agreed to make annual sinking fund deposits of $80,000.00. What amount will be in sinking fund at the end of ten years?
One month before she died on April 14, 2002, Violet Isaacson (Jeanne's mother) gave Jeanne collection of coin.
Chicago Corporation purchases 1,000 shares of the preferred stock of Denver Corp. for $40 per share. In addition, Chicago pays another 1,000 in commissions.
A company has an expected dividend next year of $1.20 each share, a zero growth rate of dividends, and a required return of 10%. The value of a share of the company's common stock;
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