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You are working on a bid to build two apartment buildings a year for the next three years. This project requires the purchase of $1,089,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life. The equipment can be sold at the end of the project for $815,000. You will also need $280,000 in net working capital over the life of the project. The fixed costs will be $528,000 a year and the variable costs will be $1,640,000 per building. Your required rate of return is 18 percent for this project and your tax rate is 35 percent. What is the minimal amount, rounded to the nearest $100, you should bid per building?
How much would you pay today for an investment that provides you $100 each year for the next five years and $1,100 six years from now if the interest rate is 4.6%? Calculate your answer to the nearest penny.
Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $4 at the end of each year. The preferred sells for $45 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required..
An exchange rate is currently 0.8000. The volatility of the exchange rate is quoted as 12% and interest rates in the two countries are the same. Using the lognormal assumption, estimate the probability that the exchange rate
Suppose your firm is owed an account receivable of C$1,000,000 due on Dec. 23, 2015. Treat this as a one-month hedge. Show how you would hedge this debt with: a money market hedge (use appropriate borrowing and lending rates),
A 30-year, $230,000 mortgage has a rate of 5.2 percent. What are the interest and principal portions in the first payment? What are the interest and principal portions in the second payment?
A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 11% (assume the market is in ..
We’ve already discussed seasonal variations and how they result from the predictable shopping habits of consumers. Describe cyclical variations. How do they compare to seasonal variations?
Diversifying Away Country Risk. Why do you think that an MNC’s strategy of diversifying projects internationally could achieve low exposure to overall country risk?
You are thinking of buying a craft emporium, it is expected to generate cash flows of 30,000 per year in years 1 through 5, and $40,000 per year in 6 through 10. if the appropriate discount rate is 8 % , what amount are you willing to pay for the emp..
The goal of this Estate Planning Case Study is to make adjustments to an existing estate plan to eliminate the potential estate tax liability. Today is January 2014 John has been your financial planning client for over ten-years. He is 61 and married..
The maintenance costs for a certain machine are $1,600.00 per year for the first 6 years and $2,400.00 per year for the next 7 years. At a interest rate of 6% per year, the present worth of the maintenance is closest to? Show work using factors in th..
Smith Corporation’s income statement for the year 2012 is given below: Sales $17,000,000 Operating costs excluding depreciation 9,000,000 EBITDA $ 8,000,000 Depreciation 1,000,000 EBIT $ 7,000,000 Interest 1,000,000 EBT $ 6,000,000 Taxes. Calculate S..
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