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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?
If the required return is 15 percent, what is the project's NPV?
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding. What are the forward price and the initial value of the f..
General Matter’s outstanding bond issue has a coupon rate of 10.8%, and it sells at a yield to maturity of 8.75%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at fac..
Find the future values of the following ordinary annuities: FV of $800 paid each 6 months for 5 years at a nominal rate of 6% compounded semiannually.
You take out a 4 year car loan for $18,000. The loan has a 4% annual interest rate. The payments are made monthly. What are the monthly payments?
You buy 500 shares of stock at a price of $57 and an initial margin of 65 percent. If the maintenance margin is 40 percent, at what price will you receive a margin call?
Determine the cash inflows and outflows for each year - evaluate the capital project by calculating the following metrics.
ART has come out with a new and improved product. As a result, the firm projects an ROE of 30%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3.0 per share. Investors expect a 16% rate of return on the stock. What pri..
What is the present value of $1,500 received for 24 months in arrears, followed by $1,200 received for 36 months in arrears, if the annual discount rate appropriate is 9.25%?
You have been managing a $10 million portfolio that has a beta of 1.4 and a required rate of return of 14%. The current risk free rate is 5.5%. Assume that you will receive another 600,000. If you invest the money in a stock with a beta of 0.75, what..
Your portfolio is worth $100,000 and has a beta of 1.12. You have $30,000 of stock A which has a beta of 1.50. The rest of your portfolio is composed of stock B with a beta of 0.84 and stock C with a beta of 1.06. What is the value of stock C in your..
Property, Inc’s stock pays $4.25 dividends per share and it is expected to pay the same amount indefinitely. The stock is currently selling for $59. What is the required rate of return on the stock?
Simon Software Co. is trying to estimate its optimal capital structure. Right now, Simon has a capital structure that consists of 20% debt and 80% equity, based on market values. (Its D/S ratio is 0.25.) The risk-free rate is 6% and the market risk p..
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