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Dog Up! Franks is looking at a new sausage system with an installed cost of $515,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $77,000. The sausage system will save the firm $195,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $36,000. If the tax rate is 35 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) NPV $ 155677.47
Suppose the average return on an asset is 12.1 percent and the standard deviation is 21.7 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to determine the probability that in any given year you wi..
Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. Construct Stephenson’s market value balance sheet befor..
Suppose the spot and six-month forward rates on the Norwegian krone are Kr6.36 and Kr6.56, respectively. The annual risk-free rate in the United States is 4.5 percent, and the annual risk-free rate in Norway is 7 percent. What would the six-month for..
Kelly Flooring spent 6 years and $800,000 to develop its new style of hardwood floors to replace a line that is becoming obsolete. To roll out its new look hardwood floors to potential builders, the company will have to invest $550,000 in new tools a..
Stock in Country Road Industries has a beta of 0.68. The market risk premium is 8 percent, and T-bills are currently yielding 4.5 percent. The company's most recent dividend was $1.9 per share, and dividends are expected to grow at a 4 percent annual..
Dye Trucking raised $280 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $7.75. If Dye had 45 million shares of stock before the recap, how many shares does it have after the recap?
You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest ..
Suppose your firm is seeking a six-year, amortizing $790,000 loan with annual payments and your bank is offering you the choice between a $839,000 loan with a $49,000 compensating balance and a $790,000 loan without a compensating balance. The intere..
Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value and a coupon interest rate of 11.3% with interest paid simiannually. A new issue would sell for $1,148 per bond and mature in 20 years. The firm's tax rate..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon r..
Article Review - Evaluating Strategic Opportunities - executive style overview and summary, with the majority of your article review content in the Opinion and Analysis and Relevance to Corporate Valuation sections.
Four years ago, Warrior Auto Service purchased some new equipment at a cost of $75,000. The equipment has since been depreciated annually using the SOYD method, assuming a life of seven years and a salvage value of $5,000. How does this offer compare..
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