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Suppose Trahan Co. is considering a three-year expansion plan in a machinery with initial investment of $4,000,000. The machinery will be depreciated using straight-line method over three years after which the value of asset will be $500,000. Machinery is expected to generate incremental sales of $3,000,000 with operating costs of 1,400,000 in year one. Sales are expected to grow by 10% for year two and three, and operating profit (after depreciation and other operating costs) margin is expected to remain constant. The applicable tax rate is 35% and the required return on this project is 15%. What are Year 1, 2, and 3 project cash flows?
The McDonnell Company has outstanding bonds with a coupon rate of 6.75% and semi-annual payments. The bonds are redeemable at their face value on December 30, 2032. If Weege can earn 5% on comparable investments and settle the transaction on March 24..
Briefly describe the Modigliani and Miller Proposition I and discuss the important conditions that are required to prove it to be true. Are they realistic?
Consider a portfolio comprising of a $3 million investment in Ariel Ltd and a $5 million investment in in Snowy Ltd. Assume that the standard deviations of the returns for the shares are 0.4 and 0.25 respectively
A bakery invests $34,000 in a light delivery truck. This was depreciated using the 5 years MACRS schedule shown above. If the company sold it immediately after the end of year 2 for $21,000. What would be the after-tax cash flow from sale of this ass..
Which element should NOT be taken into account when determining the net present value of a series of cash flows?:
Some firms had significant abnormal negative returns, but most didn't. Abnormal negative returns were short lived, meaning their stock prices returned to normal after a short period of time.
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return ..
Essex Biochemical co has $1,000 par value bond outstanding that pays 15 percent anual interest. The current yield to maturity on such bonds in the market is 17 percent. Compute the price of the bonds for these maturity dates:
Stone got a 4% 30- year mortgage for $295,200. His bank sent him a statement to notify him of his new monthly PITI payment, $1809 ( $1409 for principal and interest, $308 for taxes and $92 for homeowner's insurance). How much interest will Stone pay ..
Prepare all consolidation adjustment entries required to prepare the consolidated financial statements as at 30 June 2011. Provide a brief heading for each adjustment that you prepare.
The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0940. The variance of Willow is 0.1890, and the variance of Sky Diamond is 0.1210. What is the correlation coefficient between the returns of the two stocks?
In this assignment you will write a blog about research tools that can help a marketer understand product value and the competitive environment.
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