Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wh..
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On January 1, 2013, Boston Company purchased a machine having an invoice price of 13,000. Boston paid transportation and installation costs totalling $3,000. During installation the machine was damaged in an accident and repairs cost $500. Calculate ..
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Determine the present value of the bond payments; that is B(C). Remember the coupon is paid every six months and determine the present value of the annuity. Remember the annuity is paid every quarter.
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Determine the IRR on the following projects: a. an initial outlay of $10,000 resulting in a single free cash flow of $1,844 after 11 years. b. an initial outlay of $10,000 resulting in a single free cash flow of $2,039 after 20 years.
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An investment has a required return of 13 percent. The cash flows, in order, are -$42,000 (initial cost), $16,500 (year 1 CF), $28,400 (year 2 CF) and $7,500 (year 3 CF). Based on IRR, should this project be accepted? Why or why not?
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Genetic Insights Co. purchases an asset for $15,884. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
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Assume that you contribute $290 per month to a retirement plan for 20 years. Then you are able to increase the contribution to $580 per month for another 30 years. Given a 7 percent interest rate, what is the value of your retirement plan after the 5..
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Ebersoll Mining has $20 million in sales, its ROE is 10%, and its total assets turnover is 2.5x. Common equity on the firm’s balance sheet is 65% of its total assets. What is its net income? Write out your answer completely. For example, 5 million sh..
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Biogen, a biotechnology firm, had a beta of 1.70 in 2014. It had no debt outstanding at the end of that year. Estimate the cost of equity for Biogen, if the Treasury bond rate is 6.4 percent. What effect will an increase in long-term bond rates to 7...
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ExxonMobil (XOM) is one of the half- dozen major oil companies in the world. The firm has four primary operating divisions (upstream, downstream, chemical, and global services) as well as a number of operating companies that it has acquired over the ..
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A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. What should be the initial price of the..
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Using Treasury Quotes [LO 2] Locate the Treasury issue in Figure 6.3 maturing in February 2026. Assume a par value of $1,000. What is its coupon rate? Coupon rate 6.000 %. What is its bid price in dollars?
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