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In the spring of 2010, Jemison Electric was considering an investment in a new distribution center. Jemison's CFO anticipates additional EBIT of $100,000 for the 1st year of operation of the center in 2011, and, over the next 5 years, the firm estimates that this amount will grow at a rate of 5% per year. The distribution center will require an initial investment of $400,000 that will be depreciated over a 5 year period toward a zero salvage value using straight line depreciation of $80,000 per year. Furthermore, Jemison expects to invest an amount equal to the firms annual depreciation expense to maintain the physical plant. These additional capital expenditures will also be depreciated over a period of 5 years toward a zero salvage value. Jemison's CFO estimates that the distribution center will need additional net working capital equal to 20% of new EBIT. Assuming the firm faces a 30% tax rate, calculate the project's annual project free cash flow for each of the next 5 years,
Suppose a currency increases in volatility. what is likely to happen to its bid-ask spread? why?
Describre Capital Budgeting decision based on the capital structure and both firms expect EBIT to be $90,000. Ignore taxes
Assume the December CBOT Treasury bond futures contract has the quoted price of 89-09. The T-bond is a 20-year 6% coupon bond and interest is paid semi-annually. What is the implied annual interest rate inherent in the futures contract?
A financial advisor tells you that you can make your child a millionaire if you just start saving early. You decide to put an equal amount every year into an investment account that earns 8 percent interest per year, beginning on the day your child i..
the manufacturing manager for modern manufacturing company mmc is working on a justification for implementing a
CPX Corporation just paid a dividend of $1 each share. Analysts expect the company's dividend to increase 10 percent this year and 8 percent the next year.
Which of the following bonds poses the biggest risk to Frank's investment goals? >20-year, 105 coupon bon that may be called in 10 years >30-year, 10% coupon bond >30-year, 0% coupon bond >20-year, 0% coupon bond > 20-year, 10% coupon bond.
stock r has a beta of 1.2 stock s has a beta of 0.85 the expected rate of return on an average stock is 10 and the
A 7.05 percent coupon bond with 17 years left to maturity is offered for sale at $1,045.30. What yield to maturity is the bond offering
For a given accounting period, which of the following is likely to represent primarily variable costs?
A Corporation will pay a $2 per share dividend in one year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% each year thereafter.
A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound. If the initial margin is $2,525 and the maintenance margin is $1,000, at what price would there be a margin call?
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