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The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. Interestingly, the F-T process was used in World War II to make gasoline and other fuels.
a. If the U.S. military can save one billion gallons per year of foreign oil by blending its jet fuel with F-T products, how much can the government afford to invest (through tax breaks and subsidies) in the F-T industry in the United States? The government's MARR is 9% per year, the study period is 40 years, and one gallon of jet fuel costs $2.50.
b. If Congress appropriates $27 billion to support the F-T process industry, what is the simple payback period?
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Explain the theory behind the concept of "required return" on proposed capital investments.
Pybus, Inc., is considering issuing bonds that will mature in 19 years with an 7 percent annual coupon rate. Their par value will be $1000, and the interest will be paid semiannually. If they receive a A rating, the yield to maturity on similar A bon..
Obtain a 95% confidence interval estimate of p1 - p2. Do you come up with the same conclusion for Question 21? Why or why not?
If the firm were to increase its leverage from $15 billion to $18 billion and use the cash to repurchase shares, what would you expect its levered equity beta to be?
Determine the short run profit-maximizing price
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Jiminy’s Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 96 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? (Do..
If the bank states an effective interest rate of 12% per annum, and there are 52.15 weeks, how much interest do you earn on a deposit of $100,000 over 1 week?
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. What are the company’s capital structure weights on a market value ..
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