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You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $14,500 to purchase and which will have OCF of –$1,300 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $20,500 to purchase and which will have OCF of –$700 annually throughout that vehicle’s expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future.
If the business has a cost of capital of 11 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
JanAm generates $30 million in perpetual operating income (i.e., no change in investment policy). The company has a market capitalization of $100,000,000, and its share is currently selling at $100 per share. How can investors undo the effect of JanA..
Assuming that a fully amortizing loan is made, what will monthly payments be during year 1?- Based on (a) what will the loan balance be at the end of year (EOY) 1?
Suppose you want to hedge a $390 million bond portfolio with duration of 8.7 years using 10-year Treasury note futures with duration of 6.6 years, a futures price of 108, and 98 days to expiration. The multiplier on Treasury note futures is $100,000...
'Mullet Technologies is considering whether or not to refund a $75 million, 12 percent coupon, 30 year bond issue that was sold 5 years ago. It is amortizing $5 million of flotation costs on the 12 percent bonds over the issue's 30-year life. Conduct..
Bennington Industrial Machines issued 142,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.2 percent. Interest rates have recently increased, and the bonds now have a yield to maturity..
Put a value on both the Target and JCPenney. Calculate some valuation ratios like Price/Book Value, Price/Earnings Per Share (make sure you use fully diluted share numbers), Price/EBITDA Per Share.
The cost of equity capital is equal to the risk free rate plus an equity risk premium. In the US, over time that equity risk premium has averaged about 8.5% so that at a 3% Treasury rate, the cost of equity has averaged about 11.5%. The equity risk p..
Your money is tied up and you need to borrow $10,000. The following two alternatives are available at different banks: (1) Pay $3,311.61 at the end of each year for 5 years, starting at the end of the first year (5 payments total at 18 percent nomina..
Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/R) period of 6 days, and an accounts payable (A/P) period of 3 days. The company’s annual sales is $182,795. If the company’s annual sales are on credit, what is the inve..
An asset was purchased three years ago for $180,000. It falls into the five-year category for MACRS depreciation. The firm is in a 30 percent tax bracket. Compute the tax loss on the sale and the related tax benefit if the asset is sold now for $21,0..
Understanding the costs of capital is important. How can you compute the cost of debt? What about the cost of common equity? What are some examples ?
A company is issuing preferred stock that will pay a 4% dividend but will not pay the first dividend until 6 years from now. If the required return is 10%, what is the value of the stock today? Assume a par value of $100.
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