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Halifax Inc. is considering a project that requires an initial investment of $10 million and promises to generate an annual after-tax cash flow of $1 million perpetually. This firm is only financed by common shares and debt. In its capital structure it has 40% debt, and it wants to maintain this capital structure in future. It has bonds outstanding with a coupon rate of 8% (with semiannual coupon payment), and these bonds mature in 10 years. The bonds are currently selling at 93% of their par value. Current market risk premium is 6% and risk free rate is 4%. The firm has the same level of systematic risk as the market. The firm's tax rate is 32%. The firm does not have any internal capital for this project. Floatation cost for stocks and bonds are 4% and 2%, respectively, for this firm. Assume governmental tax authority allows firms to deduct floatation costs from taxes by amortizing over 5 years (on a straight line basis). That is, over 5 years the firm may get tax deduction on five equal amounts of the total floatation cost. As a policy the firm always use its weighted average cost of capital to discount its tax deductions for floatation costs. Given the information provided. Should the firm take the project? Complete your calculation and make your conclusion.
What percent ownership interest should Roger be willing to give to a venture investor, Syd, for his $500,000 investment?
Calculate the standard deviation of expected returns, ?X, for Stock X (?Y = 19.83%.) Round your answer to two decimal places.
What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent.
Consider contemporary practices such as skill competency based plans, broad banding, market pricing, and pay-for-performance plans. Discuss how they may affect the pay discrimination debate and discuss and explain why changes in minimum wage can affe..
AIG was effectively the largest unfunded investor in the super-senior tranches of the Abacus 2004 deal.
Calculate the NPV and IRR without mitigation. Round your answers to two decimal places.
What effective annual interest rate does the firm earn when a customer does not take the discount? (Use 365 days a year.Do not round intermediate calculations and round your final answer to 2 decimal places.
Discuss and explain what Smith meant by the "invisible hand". Determine what is the mechanism by which selfish interests are made compatible with - indeed, made the agent for - successful social provisioning?
There are a number if large projects to evaluate. What criteria are you most likely to use to evaluate these projects and why? What would each criterion tell you? Determine at least one primary and one secondary method.
A manufacturer of electronic products provides the following data relating to revenues, costs and plant capacity. The purpose is to find answers to the questions that are of primary concern to corporation.
What would be the value of this bond if interest rates fall to 5% the day after it is purchased? If interest rates fell to 5% after one year, what would the bond be worth at that point?
The Du Pont identity can be used to help managers answer which of the following questions related to a firm's operations?
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