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Your firm has a project with Free Cash Flows (FCF) listed in the table below. The year 5 FCF consists of $25 million for year 5 and $75 million that represents the present value in year 5 of FCFs in years 6 through 10. After year 10, competition will drive incremental FCF to 0. Your discount rate is 10%.
Time 0 1 2 3 4 5
FCF ($MM) -50 5 10 15 20 100
Assume before this project that the firm has 10 million shares outstanding priced at $100/share. Assume when the firm announces this project, that the market accepts the firm's FCF and discount rate estimates. If the firm intends to issue new shares to finance the project, how many shares must the firm issue?
a. 452.3 thousandb. 476.3 thousandc. 500.3 thousandd. 524.3 thousand
Find the amount that should be set aside today to yield the desired future amount.
Asian Motors Inc. plans to issue $3,000,000 of commercial paper with a 6-month maturity at 98% of par value. What is the 6-month interest rate.
Antonio's is analyzing a project with an initial cost of $32,000 and cash inflows of $27,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt a..
A business can be liquidated for $700,000, or it can be reorganized. Reorganization would need an investment of $400,000.
Rodeo Supply Corporation is considering to increase its sales by 20% next year. The sales increase will need a total additional investment in receivables, inventory, and fixed assets of $750,000.
The firm has a tax rate of 30 percent, an opportunity cost of capital of 0 percent, and it expects net working capital to increase by $93,000.00 at the beginning of the project.
You are currently investing your money in a bank account that has a nominal annual rate of 7 percent, compounded annually. How many years will it take for you to double your money?
Suppose you are planning making a movie. The movie is expected to cost $10 million upfront and take a year to make. After that, it is expected to make $5 million in the year it is released and $2 million for the following four years.
Roland & Company has a new management team that has developed an operating plan to enhance upon last year's ROE. What does Roland & Company expect return on equity to be following the changes?
Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm's FCF for the year?
Explain Valuing Bond based on the yield to maturity rate and calculate the price of the bonds at the following years to maturity and fill in the following table
Just received $145,000. If invested all in a tax-free bond fund earing 6.2% compounded quarterly. How long do you have to wait to become a millionaire? Round to 2 decimal places.
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