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EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC=12%. Calculate EMC's estimated value of operation.
We are evaluating a project that costs $1,675,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 91,000 units per year. What is the sensitivity of..
How does net working capital affect the NPV of a 5-year project if working capital is expected to increase by $30,000 and the firm has a 16% cost of capital?
Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1310 per unit; variable costs = $336 per unit; fixed costs = $3939947; quantity = 68759 units. Suppose the company believes all of its estimates are acc..
Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% (annual rate) coupon bond selling at par. What is the total return for this bond? Assume semiannual coupon payments
A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. However, Sto..
How and why does working capital affect the incremental cash flow estimation for a proposed large capital budgeting project? Explain
Identify all the important stakeholders for the entity.
Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.70, but management expects to reduce the payout by 4.5 percent per year, indefinitely. If you require a return of 12 percent on this stock, what will you pay for ..
A futures price is currently 100. At the end of six months it will be either 112 or 90. The risk-free interest rate is 5% per annum. What is the value of a six-month European call option with a strike price of 100?
What is the value today of a stock that will pay a dividend of $4.10 one year from now, a $4.70 dividend in year two and a dividend of $5 three years from now if its expected price in year three is $35? The stock has a required rate of return of 11%.
You have decided to enter the candy business. You are considering producing two types of candies: Slugger candy and Easy Out candy, both of which consist solely of sugar, nuts, and chocolate. At present you have in stock 10,000 ounces of sugar, 2,000..
The primary goal of corporate financial management is to maximize the:
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