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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sales, with costs of $743,000. The project requires an initial investment in net working capital of $260,000, and the fixed asset will have a market value of $280,000 at the end of the project. If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (MACRS schedule) If the required return is 15 percent, what is the project's NPV?
Calculate the after-tax cost of preferred stock for Bozeman-Western Airlines Inc. which is planning to sell $10 million of $6.50 cumulative preferred stock to the public at a price of $50 a share. Issuance costs are estimated to be $2 a share. The co..
Large Industries bonds sell for $1,022.38. The bond life is 12 years, and the yield to maturity is 8.2%. What must be the coupon rate on the bonds? Assume coupons are paid once a year and the face value is $1,000.
The company cost of capital for a firm with a 65/35 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:
A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is it..
George Yanase was a paying guest at the Royal Lodge-Downtown Motel in San Diego, California. Yanase was a member of the Automobile Club of Southern California. Yanase’s widow sued the Auto Club for negligence. Is the Auto Club liable?
The manager of Green Daisy Inc. is in the process of deciding whether to make or buy carburettors for its power lawn mowers. If Green Daisy decides to manufacture the carburetor, it could utilize one of two manufacturing processes. What is the break-..
One year ago, Neal purchased 3,600 shares of Franklin stock for $101,124. Today, he sold those shares for $26.60 a share. What is the total return on this investment if the dividend yield is 1.7 percent?
Suppose that a consumer's utility function is U(x,y)= xy + 10y. The marginal utilities for this utility function are MUx= y and MUy = x+10. The price of good x is Px and the price of good y is Py, with both prices positive. The consumer has income I
McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1125482 on research and development for the new clubs. The plant and equipment required will cost $28303428 and will be depre..
A house painting business had revenues of $17,600 and expenses of $10,600 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital:
Estimate the historical standard deviation of google and compare the implied standard deviation with the historical standard deviation.
You are a bond trader and observe the following three US government bonds trading in the market: (Face value = $1000.) What is the market interest rate that applies to all bonds? What is the YTM on the three bonds? Suppose now you see the following U..
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