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Stackhouse Industries has a new project available that requires an initial investment of $5.5 million. The project will provide unlevered cash flows of $775,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of .25. The company’s bonds have a YTM of 6.5 percent. The companies with operations comparable to this project have unlevered betas of 1.25, 1.18, 1.40, and 1.35. The risk-free rate is 3.5 percent, and the market risk premium is 6.7 percent. The company has a tax rate of 35 percent. What is the NPV of this project?
Since its inception, Eco Plastics Company has been revolutionizing plastic and trying to do its part to save the environment. Eco's founder, Marion Cosby, developed a biodegradable plastic that her company is marketing to manufacturing companies thro..
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,310,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life.
Cavo Corporation expects an EBIT of $33,000 every year forever. The company currently has no debt, and its cost of equity is 16 percent. The corporate tax rate is 35 percent. What is the current value of the company? Suppose the company can borrow a..
One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $500 per month. You will charge 1.45 percent per month interest on the overdue balance. If the current balance is $13,500, how long..
The carmar company has preferred stock that is selling at $22 per share and its preferred stockholders have a required return of 14.54%. The company has common stock too and expects to pay dividends of $1.10 per share in 2016, $1.00 in 2017, zero in ..
Although NOLs represent a potential source of value, their use must be monitored carefully to realize their full value resulting from the potential for deferring income taxes. The sale of assets by a target firm will result in a taxable gain if the f..
Your father helped you start saving $20 a month beginning on your 5th birthday. He always made you deposit the money into your savings account on the first day of each month just to "start the month out right." Today completes your 17th year of savin..
Describe the variables and their scale of measurement
Write a short essay of 350-400 words for each of the following questions. Where possible, illustrate with an appropriate example in your answer. You must support your discussion with appropriate references.
If an investor purchases shares in a no-load fund for $36, receives cash distributions of $1, and redeems the shares after one year for $42, what is the percentage return on the investment?
Explain how a bank's credit risk and interest rate risk can affect its liquidity risk.
Fullerton Company's bonds are currently selling for $1,200.00 per $1000 par-value bond. The bonds have a 10% coupon rate and will mature in 11 years. What is the yield to maturity? (assume semi-annual coupon payments).
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