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Cee-ing Eye Corp. needs to decide whether to invest in research on a new drug that would instantly and painlessly cure most eyesight problems. Investing in research on the drug is estimated to cost $6 million to be paid immediately. If it decides to invest in research, the probability of technical success is 0.03. If Cee-ing Eye Corp. has technical success, it can choose between a basic or aggressive marketing strategy. A basic marketing strategy will cost the firm $2 million, and an aggressive marketing strategy will cost $9 million. The cost of the marketing strategy will be incurred in year 3. An aggressive marketing strategy has a 0.92 probability of success, and a basic marketing strategy has a 0.71 probability of success.The net cash flow given marketing and technical success will be $102 million in year 4. The net cash flow with no marketing success but with technical success will be $14 million in year 4. If there is no technical success, there is no other cash flow expect for the immediate cost of investing in research. If Cee-ing Eye decides not to invest in research, its net present worth (NPW) equals $0. You should assume the cash flow is $0 in each year except for years 0, 3, and 4. Cee-ing Eye Corp. will choose the alternative with the largest expected NPW, and its MARR is 15%. What is the expected NPW of the optimal alternative? Express your answer in MILLIONS of dollars. In other words, if the correct answer is $12.3 million, enter 12.3.
A cooperative agreement among oligopolists is more likely to be maintained,
Last year, Joan purchased a $1,000 face value corporate bond with an 9% annual coupon rate and a 30-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.49%. If Joan sold the bond today for $1,043.28, what rate of re..
A few well publicized investors have consistently earned higher than normal returns in the market over the last decade (for example, Warren Buffett). What does this imply about the EMH? How would you explain their success?
The bonds have an 9.3% coupon rate, payable semi annually, and a par value of $1,000. They mature exactly 10-years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5965%. Recognizing that coupons are paid semiannually, calculate the bond's price in details. What is the coupon rate / what is the YTM?
Create aging schedule that compares the 3 payers. What are your thoughts? How does this aging affect your budgets?
Firm A just issued a convertible bond which bondholders can convert their bond into firm’s common stocks right after the second year. This bond is 10-year, 6 percent coupon bond with $1,000 face value. What would be the price of this convertible bond..
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $7.65, but management expects to reduce the pay out by 5 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a sha..
Stock Y has a beta of 1.01 and an expected return of 8.38 percent. Stock Z has a beta of .70 and an expected return of 7 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
Eastern Clothing Company is considering manufacturing a new style of shirt, whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new wor..
Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. what value, if any, should be included in the initial cash flow of the pro..
Develop an Income Statement, Cash Flow Statement, and Balance Sheet based on the provided data for year 20XX (the previous year) that follows.
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