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Your company has a debt ratio of .5, a total assets turnover ratio of .25, and a profit margin of 8 percent. The Board of Directors is unhappy with the current return on equity (ROE), and they think it could be doubled. This could be accomplished (1) by increasing the profit margin to 10 percent, and (2) by increasing debt utilization. Total asset turnover will not change. What new debt ratio, along with the new 10 percent profit margin, would be required to double the ROE?
Draw the payoff diagrams (at maturity) for the following combinations of ABC stock and its options.
What are the worst-case and best-case IRRs? What are the worst-case and best-case NPVs?
Use Excel formulas to do all the calculations, that is, do not calculate anything on a calculator and just input the answer in your file. Develop a spreadsheet model, and use it to find the project’s NPV, IRR, and payback. Conduct a sensitivity analy..
A municipality is considering an investment in a small renewable energy power plant with the following parameters. The cost is $360,000, and the output averages 50 kW year-round. Calculate the NPV of this investment. Is it financially attractive?
Prepare and submit a consultancy report to the management of Anthony's Orchard, the company studied throughout this module. The company is considering expanding its product line to include apple juice.
At the end of its third year of operations, the Sandifer Manufacturing Co. had $4,500,000 in revenues; What is the net income of the firm for the year?
What are two unethical practices of some financial managers in preparing financial statements that could hurt their company? Describe three potential causes of errors in preparing projected statements for a company over the next few years.
You need a 35-year, fixed-rate mortgage to buy a new home for $310,000. Your mortgage bank will lend you the money at an APR of 6.05 percent for this 420-month loan. How large will this balloon payment have to be for you to keep your monthly payments..
Brad’s company, an eastern based firm, is going through tough times. Downsizing is the only way to keep the company from going bankrupt. Brad has been given the assignment to eliminate an unprofitable region. More analysis indicates that if the corpo..
Brankov Company purchased common stock in Ramona Company for $400,000. In the current year, Ramona Company reported net income of $50,000 and paid a dividend of $32,000. At the end of the year, the market value of the investment in Ramona Company was..
Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3-year life, and would have a zero salvage value after Year 3. ..
In many business decision scenarios, managers faces the dilemma, for example, whether to continue the project or to abandon it, whether to finance a project with debt or equity, etc. How can we apply the knowledge of traditional option pricing techni..
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