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Suppose your company needs to raise $36.9 million and you want to issue 24-year bonds for this purpose. Assume the required return on your bond issue will be 9.4 percent, and you’re evaluating two issue alternatives: a 9.4 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Both bonds would have a face value of $1,000. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firm’s aftertax cash outflows for the first year under the two different scenarios.
We are evaluating a project that costs $1,180,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,100 units per year. Suppose the projections g..
ABC Manufacturing’s current capital structure is comprised of 35% debt and 65% equity. What is ABC’s weighted average cost of capital?
An aspect of short-term financial planning is forecasting operating cash flow and ultimately the profitability of the company in the coming period. This type of financial planning typically uses forecasted ________. Calculating the weighted average c..
Suppose a firm is expected to increase dividends by 10% for the next two years. After that dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 20%, what is the price of the stock? Reme..
You are in the process of buying a house. Your mortgage lender reviewed your credit score, employment history, debt-to-income ratio, and available funds you’ve set aside for the down payment. Which of the two is a better financing decision, and why? ..
Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm's WACC. The Fed's act..
Paychex Inc. (PAYX) recently paid an $0.70 dividend. The dividend is expected to grow at an 11 percent rate. The current stock price is $41.31. What is the return shareholders are expecting?
Using the information below, calculate the firm’s operating and cash cycles.
The current set of spotinterest rates with one, two, three and four years to maturity are 4%, 6%, 7% and 7.5% respectively.
You need a 30-year fixed rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at an APR of 5.25 % for this 360 month loan, However you can afford monthly payments of only $975, so you offer to pay off any remaining..
Quint Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset is classified for taxes under the 3-year MACRS schedule. If the tax rate is 34 percent, what is the ..
Assume that a new project will annually generate revenues of $2,300,000 and cash expenses (including both fixed and variable costs) of $700,000, while increasing depreciation by 170,000 per year. In addition the firm’s tax rate is 33%. Calculate the ..
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