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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.64 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,060,000 in annual sales, with costs of $755,000. The tax rate is 35 percent and the required return on the project is 13 percent. What is the project’s NPV?
Suppose you bought a bond with a coupon rate of 8.9 percent one year ago for $912. The bond sells for $956 today. Required: (a) Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total..
Bond X is a premium bond making annual payments. The bond has a coupon rate of 8.2 percent, a YTM of 6.2 percent, and has 15 years to maturity. Bond Y is a discount bond making annual payments. What are the prices of these bonds today? What do you ex..
What is the IRR for the following project if its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?
In 2012, Rector Industries generated net income of $87,800. The company reported depreciation expense of $6,500 and paid dividends of $2,500. During the year, accounts payables increased by $1,300, accounts receivables increased by $2,200, inventory ..
You have graduated, and are on the staff of the Assistant Treasurer of company CKS. (You are an assistant to the Assistant Treasurer.) Your boss, the Assistant Treasurer, recently attended a conference at which he heard that swaptions could be used t..
You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.50 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $45 per share. The required return on Avondale stock is 20 percent. If you would..
Everdeen, Inc has a 100-day operating cycle. If its average age of inventory is 35 days, how long is its average collection period? If its average payment period is 30 days, what is its cash conversion cycle?
Dexter Mills issued 25-year bonds two year ago at a coupon rate of 10 percent. The bonds make semi annual payments. The nominal annual yield-to-maturity on these bonds is 9 percent. What is the current bond price?
Dandle’s Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number of workers or a small factory with a large number of workers. Calculate the accou..
Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of..
The project will require an additional invest- ment in working capital of $250,000 in year 0 and $150,000 at the end of year 1. What net cash flow will this project produce in year 10?
Bennington Industrial Machines issued 154,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.4 percent. Interest rates have recently increased, and the bonds now have a yield to maturity..
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