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Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and $10.00 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.00 million, $2.00 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.) NPV$ The project should be.
You are planning to save for retirement over the next 25 years. To do this, you will invest $790 a month in a stock account and $390 a month in a bond account. The return of the stock account is expected to be 9.9 percent, and the bond account will p..
Value a Constant Growth Stock Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 11.00 percent. Their recent dividend was $1.33. What is the value of their stock when the required rate of return is 14.00 percent?
The corporate bylaws are identical for all firms incorporated in a particular state. Corporate bylaws dictate a firm's behavior inside its home country and corporate charter outline rules for operating in foreign countries. For a manufacturing firm, ..
A bond with a $1,000 par value has an 8.35% coupon rate. It will mature in 5 years, and coupon payments are made semi-annually. Present annual yields on similar bonds are 7.35%. What should the current price be;
Consider a three-year project with the following information: initial fixed asset investment = $674,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $32.95; variable costs = $22.00; fixed costs = $204,500; ..
Three zero coupon risk-free discount bonds of one, two and three year term to maturity are selling for, respectively, $950, $890 and $800. What would be the selling price today of a 10% coupon bond of 3 year maturity (maturity value $1,000)?
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,250. Because you must repay a total of $29,250 in one year, the finance company requires you to pay $29,250/1..
Garner-Wagner has a project that produces the following cash flows: CF0 = −3,000,000; CF1−5 = 500,000; and has a discount rate of I/YR = 10. CF0 = −3,000,000; CF1−5 = 500,000; I/YR = 10. If Garner-Wagner goes ahead with this project today, it will ob..
Suppose there are two firms with the same perpetual cash flow, EBIT = $1500. The firms are identical except for their capital structure. Firm U is unlevered and Firm L is levered with a perpetual debt. The current values of the firm are Vu = $15,000 ..
Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 6%. Van Buren currently expects to pay a year-end dividend of $1.70 a share (D1 = $1.70). Van Buren..
What is the present value of a perpetuity making quarterly payments in arrears in the amount of $9,478 per quarter, and the appropriate annual rate of interest is 11.4%?
Callaghan Motors' bonds have 20 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10.5%, and the yield to maturity is 11%. What is the bond's current market price? Round your answer to t..
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