The Executive Committee of PLE is debating whether to replace its original tractor model, the PLEClassic, with a new model, the PLETough, which would appeal to a younger clientele. Whatever tractor chosen will be produced for the next 4 years, afte..

If the rate goes down, present value goes down. Depreciation creates a tax shield equal to Deprecation times 1 minus the appropriate tax rate. If two firms are identical except one is levered (has debt) and one is unlevered (no debt, the unlevered fi..

Will premiums on interest rate floors on three month LIBOR be high or low? Explain. Will premiums on interest rate caps on three month LIBOR be high or low? Explain.

Quad Enterprises is considering a new threeyear expansion project that requires an initial fixed asset investment of $2.94 million. The fixed asset will be depreciated straightline to zero over its threeyear tax life. The project is estimated to g..

A company must decide whether to buy Machine A or Machine B. What is the equivalent uniform annual cost (EUAC) of Machine A? What is the equivalent uniform annual cost (EUAC) of Machine B? Which machine should one choose?

The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 3/10, net 90, and it currently pays on the 10th day and takes discounts. However, it could forgo disco..

Thatcher Corporation's bonds will mature in 12 years. The bonds have a face value of $1,000 and an 11.5% coupon rate, paid semiannually. The price of the bonds is $1,050. The bonds are callable in 5 years at a call price of $1,050. What is their yiel..

Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 1903, which has a cost of $220,000, a 3year expected life, and aftertax cash flows (labor savings and depre..

Consider the following information form September 15th, 2012 for a coupon bond with face valueof $1000 and maturity on September 15th, 2014: What was the bond current yield? Why is the bond's yield to maturity greater than its coupon rate?

Assume Gillette Corp will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 11.5% per year thereafter until the 5th year. Thereafter, growth will level off at 2.1% per year. According to the dividenddiscount..

In an efficient capital market:

Arthur is to receive an inheritance of $40,000 from a greataunt. She is offering him the choice of taking $40,000 today OR an annuity of $5,000 a year for 25 years. Utilizing time value of money calculations as in the previous problems, please deter..
