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Corporate Finance - Valuation Analysis
You should provide detailed solutions.
Problem 1-Valuing a patent: Newgene is a bio-technology firm with a patent on a drug called Innovex, which has received FDA approval for use in treating diabetes. Assume you are trying to value the patent and that you have the following estimates for use in the option pricing model:
a. What will be the NPV of the project if the firm starts developing the drug today rather than wait.
b. What is the value of the patent today.
Problem 2 - Value equity in a distressed firm: Assume that you are valuing the equity in a firm whose assets are currently valued at $60 million; the standard deviation in this asset value is 45%. The face value of debt is $90 million (it is zero coupon debt with 10 years left to maturity). The 10-year Treasury bond rate is 6%.
a. Estimate the value of the firm's equity.
b. Estimate the default spread (over and above the risk-free rate) that debt investors would charge for the firm's debt.
If you require an 8.4% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Today, you can get either 121 Canadian dollars or 1,288 Mexican pesos for 100 United State dollars. Last year, 100 United State dollars was worth 115 Canadian dollars or 1,291 Mexican pesos.
The rate of return you would get if you bought a bond and held it to its maturity date is called the bond's yield to maturity. If interest rates in the economy rise after a bond has been issued.
you can earn 0.45 per month at your bank. if you deposit 1500 how long must you wait until your account has grown to
Last year Steve bought hundred shares of Dallas Company common stock for $53 per share. During the year he received dividends of $1.45 per share.
At my work, I support a particular group of people with back up assistance of a consultant from a third party supplier. This third party supplier backs me up as well as a colleague of mine who supports an entirely separate group of customers.
You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly 181⁄2 years old, and you have just made a payment. If th..
Using the deferral method, prepare a statement of revenues and expenses and a statement of changes in net assets for Wise Owls for 20X1.
Finance The financial sector has a profound influence on important macroeconomic variables like GDP growth, employment and inflation. The evolution of financial institutions has made the world's economies more interconnected than ever, allowing fi..
Decision making on the basis of expected return and volatility of project and Suppose you have two good projects in which you could invest
Under this approach management makes the decision on whether or not an item is extraordinary and therefore excluded from the income statement.
Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project?
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