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Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project. The company currently has a target debt–equity ratio of .35, but the industry target debt–equity ratio is .30. The industry average beta is 1.50. The market risk premium is 6 percent, and the risk-free rate is 4 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate tax rate is 35 percent. The project requires an initial outlay of $678,000 and is expected to result in a $98,000 cash inflow at the end of the first year. The project will be financed at Blue Angel’s target debt–equity ratio. Annual cash flows from the project will grow at a constant rate of 4 percent until the end of the fifth year and remain constant forever thereafter. Calculate the NPV of the project.
Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81,406, a payback period of 2.48 years, and an AAR of 9.31 percent. Project B has an NPV of $82,909, a payback period of 2.57 years, and an AAR of 9.2..
among the cash management techniques used by most businesses are those that slow down their bill payments. a good
You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% annual coupon. The bond has a current yield of 5.74%. What is the bond's yield to maturity? Round your answer to two decimal places.
Camilia plans to go for vacation to Australia in 5 years from now. She estimates that she will need 29,349 for the trip. How much does she need to place in a savings account today that earns 4.16% per year (compounded quarterly) to accumulate this am..
international financial managementquicknourish plc is considering new developments abroad. the two prime candidate
The Treknotrics store begins each week with 300 phasers in stock. This stock is depleted each week and reordered. If the carrying cost per phasers is $38 per year and the fixed order cost is $75, what is the total carrying? What is the restocking cos..
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $26,400, and the company expects to sell 1,490 per year. The company currently sells 1,990 units of its existing model per year..
Extended Warranty. Ted just moved into an apartment, and it does not have a refrigerator. A refrigerator is worth $3 every day because Ted will eat out less. Ted has a discount rate of 28%. Refrigerators usually last 4 years. How much is Ted willing ..
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.97 million. The fixed asset falls into the three-year MACRS class. The project requires an initial investment in net w..
An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to $5000 each year. Joe and Jill both will make IRA deposits for 30 years (from age 35 to 65) into stock mutual funds yielding 9.4%. Joe deposits ..
What are the factors that would influence the Federal Reserve in adjusting the discount rate? How does the discount rate affect the decisions of banks in setting their specific interest rates? How does monetary policy aim to avoid inflation?
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $80,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,900 every six months over the subsequent eight years, and ..
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