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You’re considering investing in a project with the following characteristics:
The investment of $400 can be depreciated to zero book value over 10 years.
EBITDA in year 1 is equal to $100, and from there on is expected to grow at 5% per year, every year, forever.
NWC requirements are $100 in year 0, and expected to remain constant forever.
The discount rate for all cash flows is constant and equal to 20% per year.
Compute the NPV of the project if the tax rate is 0% per year. Is the IRR in this case higher or lower than 20%?
Compute the NPV of the project if the tax rate is 40% per year. Is the IRR in this case higher or lower than 20%?
q1amulroney did not use working capital cash flows in her original analysis. the analysis aboveincludes incremental
Company XYZ enters into firm commitment underwriting agreement with Company ABC to issue 4200 of bonds with a 1,000 face value. Company ABC agrees to buy the bonds for $620 each and sells 84% of the issue in the market for $831 per bond. What are the..
To pay for her college education, Gina is saving $2,000 at the beginning of each year for the next eight years in a bank account paying 12 percent interest. How much will Gina have in that account at the end of 8th year?
What is the present value of a perpetuity of $900 per year if the appropriate discount rate is 10.91%? Round your answer to the nearest cent. If interest rates in general were to double and the appropriate discount rate rose to 21.82%, what would its..
At year-end 2013, Wallace Landscaping total assets were $1.9 million and its accounts payable were $335,000. Sales, which in 2013 were $2.8 million, are expected to increase by 30% in 2014. Total assets and accounts payable are proportional to sales,..
in a three- to five-page paper not including title and reference pages select a service organization to use as an
NEC Inc is considering a $50 million project in its power system division. Tom Edison, the company’s chief financial officer, has evaluated the project and determined that the project’s unlevered cash flow will be $3.5 million per year in perpetuity.
Call protection for the next 10 years, and a call premium of $25. What is the yield to call (YTC) for this bond if the current price is 110 percent of par value?
Great Seneca Inc. sells $100 million worth of 21-year to maturity 8.91% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $988 for each $1,000 bond. The firm's marginal tax rate is 40%. What is the after-tax cost of capital f..
From a purely financial perspective are there situations in which a business would be better off choosing a project with a shorter payback over one that has a larger NPV?
Black Hill Inc. sells $100 million worth of 27-year to maturity 10.81% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $975 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?
A company must pay liabilities of $19000 and $11000 at the end of years 1 and 2, respectively. The only investments available to the company are 1 and 2 year zero coupon bonds with yields 6% and 7%, respectively. Calculate the cost to the company tod..
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