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Kyle’s Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow of $130 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Site A Site B Probability Cash Flows Probability Cash Flows .3 80 .2 50 .3 130 .2 80 .1 160 .3 130 .3 170 .1 180 .2 235 a. Compute the coefficient of variation for each site. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Coefficient of Variation Site A Site B b. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measure of risk. Site A Site B
Rocky Mountain Chemical Corporation (RMC) is thinking of replacing the packaging machines in its Texas plant. Each packaging machine currently in use has a net book value of $1 million and will continue to be depreciated on a straight-line basis to a..
What was the premium on the Dec. BABA 118 put? Was this option in or out of the money? What was the intrinsic value of this put? What is the time value?
Assume you are the CFO at Porter Memorial Hospital. The CEO has asked you to analyze 2 proposed capital investments- Project X and Project Y. Each project requires a net investment outlay of $ 10,000, and the opportunity cost of capital for each proj..
The 12.21 percent coupon bonds of the Peterson Co. are selling for $900.05. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent
WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. What is the WACC for the last dollar raise..
A firm pays a $9.80 dividend at the end of year one (D1), has a stock price of $137, and a constant growth rate (g) of 5 percent. Compute the required rate of return (Ke)
Compute the payback for each project. Compare the payback for Project A with the payback of Project B. Compare the payback for Project B with the payback of Project C. Compare the payback for Project A with the payback of Project C.
Using the information from the two previous problems, what is the Capital Structure mix on a dollar value basis for the BA707 and AB300 companies? What is the company’s weighted average cost of capital? What is the value of the company? What is the v..
Assume that $1000.00 par value, semiannual coupon U.S. Treasury note with two years to maturity (YTM) has a coupon rate of 5%. The yield to maturity of the bond is 8.80%. Using this information and ignoring the other costs involved, calculate the val..
General Forge and Foundry Co. is considering investing in a project in which the risk is greater than the firms current risk based on any method for assessing risk. Which of the following should management do when evaluating this project?
Consider the following information on large-company stocks for a period of years. Series Arithmetic Mean Large-company stocks 13.1 % Small-company stocks 16.4 Long-term corporate bonds 6.2 Long-term government bonds 6.1 Intermediate-term government b..
Payments are made at the beginning of each quarter for 50 quarters. The first payment is $100, the second payment is $102, the third payment is $104, and so on, with each subsequent payment increasing by $2. If the effective interest rate is 2.5% per..
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