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ACME Corp is a publicly traded firm listed on the NASDAQ. Its current common stock price is 10 dollars per share. The company currently has 75 million dollars in sales. It expects sales to grow at 3 percent a year for the next several years. The company’s current fixed costs are 50 million dollars. The federal tax rate is 40 percent. The variable costs are 22.5 million dollars this year. There are 1,000,000 shares outstanding.The company has four capital projects that it would like to fund this year. If funded all four projects would be producing results for the firm one year from now. Project A has a life of 8 years, an initial investment of 2 million dollars, and an IRR of 12 percent. Project B has a 5 million dollar initial investment and a five-year life with an annual net cash income expected of 1,318,982 and an IRR of 10 percent. Project C has a life of 10 years, an IRR of 10 percent and a 4 million dollar initial investment. Project D is a 7-year project with an initial investment of 3 million dollars and a 9 percent IRR.If the company uses debt, its investment banker suggests the following structure: 8 year maturity, equal annual principal repayments over the 8 years, and a 12 percent interest rate on outstanding principal.The company pays no dividends on its common stock. The investment banker said to assume the firm would be able to issue common stock at the current market price, assuming the earnings per share will not be hurt in the future.Preferred stock can be issued for a par value of 25 dollars per share and an annual dividend yield of 8 percent per share. Preferred dividends are not tax deductible to the company. Instead they are paid out of net income after taxes. Earnings per share on common stock should be calculated after preferred dividends have been paid. The numbers of shares of preferred stock are not included in the earnings per share calculation. This only includes common stock.For this case, we are not going to require a marginal cost of capital analysis. Assume that all four projects are going to be done. The Price Earnings ratio that is calculated in problem number one should also be utilized, as appropriate in each of the five remaining problems to forecast the stock price.
Similar bonds without a conversion feature returned 10% at the time. The bond is convertible into stock at a price of $35. The stock is now selling for $40.
If a new technologist aide is hired, what is the monthly patient volume needed at the original reimbursement rate to cover variable costs, but not profit?.
If the risk-free rate is 2.5%, beta of the asset is 1.57, and the expected return of the asset is 13.25%, what is the market risk premium?
This bond pays a 9 percent coupon, has a YTM of 11 percent, and also has 11 years to maturity. What is the price of each bond today?
A company has outstanding $100 million worth of common stock on which investors require a return of 15%. In addition, the firm has outstanding $50 million in bonds that offer 9% return.
Suppose that you buy a new car that costs $30,000 and you are able to pay $3,000 of the cost in cash and borrow the remainder from a bank that offers a conventional amortizing loan with monthly payments.
An investment project has annual cash inflows of $4,300, $4,000, $5,200, and $4,400, and a discount rate of 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,800?
Describe Current degree of financial leverage and McFrugal's tax rate is 40% and The firm also has outstanding 1 million shares of common stock
Procter Micro-Computers, Corporation, requires $1,200,000 in financing over the next two years. The company can borrow the funds for two years at 9.5% interest per year.
which is also expected return on new investment. Its earnings are expected to grow forever at a rate of 5.5% per year. If its next dividend is due in one year, what do you estimate the firms current stock price to be?
Discuss and explain the 10 basic principles of finance. how does these principles relate to the goal of wealth maximization.
Charlotte's firm had sales of $525,000 in the year ended 2000. By the year ended 2012, sales had increased to $1,200,000. What was the average annual rate of increase?
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