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Calculate the Project and Equity Free Cash Flows for the following scenario. We want to finance a project with 30% debt (70% equity). We expect $1,000,000 in sales for next year; COGS to be 55% of sales; depreciation will be $400,000 and offset with $400,000 in new CAPEX. Assume that Year 1 is the first year of a perpetuity with no growth (you get the t1 cash flow for ever). The firm's cost of debt is 4% (assume the debt is perpetual and you never pay down any principal); the cost of equity is 12%; the tax rate is 35%. Hint: to determine the EFCF you will need to determine the value of the firm and the value of "D" so you can find the interest payment. Part II: If the firm in Problem 4 were to decide to use 50% debt, how would the Project Free Cash Flow be affected?
If the expected rate of inflation suddenly rises to 8.9%, what does the Fisher theory say about the real interest rate will change?
Asian Motors Inc. plans to issue $3,000,000 of commercial paper with a 6-month maturity at 98% of par value. What is the 6-month interest rate.
A firm's preferred stock pays an annual dividend of $2, and the stock sells for $65. Flotation costs for new issuances of preferred stock are 5% of the stock value. What is the after-tax cost of preffered stock if the firm's tax rate is 30%?
The employee explains that with this policy the company will never show a loss on its real estate investment activities. Do you agree with the employee ? Why, or why not?
If a new technologist aide is hired, what is the monthly patient volume needed at the original reimbursement rate to cover variable costs, but not profit?.
Rhiannon Corporation has bonds on the market with 13.5 years to maturity, a YTM of 7.6 percent, and a current price of $1,175. The bonds make semiannual payments. What must the coupon rate be on these bonds?
How do you justify the fact that share value is determined by PV of all future dividends but most investors don't need to hold the share forever to profit from such investment?
Computation of bonus on shares sold & share of bonus to each partner and The bonus that is granted to Groh and Jackson equals
Calculate the total number of copies that the publisher expects to sell in year 3 and Number of copies sold after 3 years.
Upon completion of her introductory finance course Marla lee was so pleased with the value of useful and interesting knowledge she gained that she convinced her parents,
Explain the main goal a financial manager is trying to achieve and the types of decision financial manager makes.
A firm with the rating AA plans to issue one million shares of a 4 year-10% bond with face value $100. After the financial crisis this firm is downgraded to a B rating. The risk free rate is 1.5%. The default spreads are given in the table below.
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