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Assignment
Calculate the Project and Equity Free Cash Flows for the following scenario. We want to finance a project with 30% debt (70% equity). We expect $1,000,000 in sales for next year; COGS to be 55% of sales; depreciation will be $400,000 and offset with $400,000 in new CAPEX. Assume that Year 1 is the first year of a perpetuity with no growth (you get the t1 cash flow for ever). The firm's cost of debt is 4% (assume the debt is perpetual and you never pay down any principal); the cost of equity is 12%; the tax rate is 35%. Hint: to determine the EFCF you will need to determine the value of the firm and the value of "D" so you can find the interest payment.
Part II: If the firm in Problem 4 were to decide to use 50% debt, how would the Project Free Cash Flow be affected?
What is the approximate probability that the average weekly postage expense for the past 52 weeks will exceed the budgeted amount of $400?
What would make for a larger increase in the stock's variance: an increase of .15 in its beta or an increase of 3% in its residual standard deviation?
You have been asked by a manager in your organization to put together a training program explaining Net Present Value (NPV) and Future Value (FV) and how they are used to evaluate the price of stock. You have been given the following objectives:
A company's acceptable minimum return on capital (i.e., WACC) is 12%. If the debt/equity ratio is 1:1, and the after-tax cost of debt is 5% (the company is in the 40% tax bracket), what is the corresponding minimum acceptable return on equity?
Suppose you want to purchase a new ski boat two years from now, and you plan to save $8,200 per year, starting one year from today. You will deposit your savings in an account that pays 6.2% interest.
In the event that the pipeline is utilized everlastingly, what is the present estimation of its money streams
Find online the annual 10-K report for Peet’s Coffee and Tea (PEET) for 2008. Answer the following questions from their balance sheet
pats twins sherry and katie finished their first year of school at an accredited university in 2013. she paid 9000 in
1.Which one of the following terms is defined as the mixture of a firm's debt and equity financing?
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