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It is the beginning of September and you have been offered the following deal to go? heli-skiing. If you pick the first week in January and pay for your vacation? now, you can get a week of? heli-skiing for $3,500.
?However, if you cannot ski because the helicopters cannot fly due to bad? weather, there is no? snow, or you get? sick, you do not get a refund. There is a 35% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect and you are? well, the vacation will cost you $5,000.
You estimate that the pleasure you get from? heli-skiing is worth $7,900 per week to you? (if you had to pay more than? that, you would choose not to? go). If your cost of capital is 16% per? year, should you book ahead or? wait?
You should (wait or book ahead) because the NPV of this choice is ?
You can buy a $50 savings bond today for $25 and redeem the bond in 10 years for its full face value of $50. You could also put your money market account that pays 7% interest per year. Which option is better, assuming they are of equal risk? You dec..
The Modigliani and Miller hypothesis does NOT work in the "real world" because:
Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of..
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You have $100,000 invested. Of that, $50,000 is invested in IVM stock which has a beta of 1.4, $30,000 is invested in UBM stock with a beta of 1.2, and the remainder is invested in T-Bills. Which of the following is true?
You need to choose between making a public offering and arranging a private placement. In each case the issue involves $10.9 million face value of 10-year debt. You have the following data for each: A private placement: The interest rate on the priva..
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