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Question: CAPITAL BUDGETING
X Company is exmanining two mutually exclusive proposals for new capital investment.The data on the proposals are as follows
A B ($) ($)
Net cash outlay 40000 50000Salvage value Nil NilEstimated life 4 years 4 yearsDepricistion SLM SLMIncome Tax rate 50% 50%Cut off rate for appraisal 10% 10%EBITIst Year 12000 140002nd Year 14000 160003rd Year 16000 180004th Year 22000 220005th Year - 20000
You are asked to advise which proposal would be financially preferable.
Five million shares issued with a current market price of 6. Equity holders require a 9% return and $10 million face value of Corporate bonds outstanding.
A company has taxable income of $3,200 with a tax rate of 38 percent. Owners equity is: $3400 in stock, $400 in capital surplus, and $100 in retained earnings. What is the return on equity (ROE)?
A researcher is determining if exercising 3 times a week is more effective than pharmaceuticals or psychotherapy. A total of 20 psychiatric patients were assigned to one of four treatment conditions and asked self-reported depression on a scale o..
financial modeling and valuation
When conducting a formal hypothesis test, there are different errors that may be made, depending on your decision. One decision is to reject the null hypothesis. If you falsely do not reject the null hypothesis, what type of error has been made?
The commission rate is 0.5%. The market interest rate is 5.0% and the short rebate rate is 3.0%. Evaluate the gain or loss to the lender.
The stock's price is currently $24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 35%, and its WACC is 13.95%. What percentage of the company's capital structure consists of debt?
Suppose that the risk free rate is 5%, the expected market return is 10%, the beta of firm XYZ is 2, the current dividend that XYZ has just paid is 1 and dividends are expected to grow at a rate of 10% per year. What should be the price of the fir..
which 1000 bond has the higher yield to maturity a twenty-years bond selling for 800 with a current yield of 15 or a
Find the future values of the following ordinary annuities: a. FV of $400 each 6 months for 5 years at a nominal rate of 12 percent, compounded semiannually. b. FV of $200 each 3 months for 5 years at a nominal rate of 12 percent, compounded quarterl..
Martha's Pancake House, Inc. just paid its annual dividend of $0.80 a share. The stock has a market price of $13.00 and a beta of 1.04. The return on U.S. Treasury bills is 2.5 percent and the market risk premium is 7.3 percent. What is Martha's c..
Lennox Furniture Company's 2005 balance sheet showed total current assets of $1,200,000. All of the current assets were required in operations, and its current liabilities consisted of $400,000 of accounts payable and $100,000 of accrued wages and..
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