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Big Sky Mining Company must install 1.5 million of new machinery it its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: (1)The machinery falls into the MACRS 3-year class. (2)Under either the lease or the purchase, Big Sky must pay for insurance, propery taxes, and maintenance. (3)The firms tax rate is 40%. (4)The loan would have an interest rate of 15%. (5)The lease terms call for $400,000 payments at the end of each of the next 4 years. (6)Assume that Big Sky Mining has no use for the machine beyond the expiration of the lease. The machine has an estimated residual value of $250,000 at the end of the 4th year. What is the NAL of the lease?
A company's ROE is 18%. Their dividend payout ratio is 80%. The last dividend just paid was $2.20. If dividends are expected to grow by the company's internal growth rate indefinitely, what is the current value of their common stock if its required r..
The law firm of Dewey, Cheatem, and Howe has monthly fixed costs of $98,000, EBIT of $223,000, and depreciation charges on its office furniture and computers of $7,000. Calculate the Cash Flow DOL for this firm.
On the other hand, Nguyen and Tang (2009) find that- The 2008 short-sale ban has a ________ (positive or negative or no) impact on the stock prices of the banned stocks in the ban period.
The Global Growth Fund is a load fund with a 6 percent front load fee. It started the year with a Net Asset Value (NAV) of $16.50. During the year the fund distributed $1.05, and at the end of the year its NAV was $17.95. What was the fund's return, ..
The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): CAPM method, DCF method, and Bond-yield-plus-risk-premium method.
Mr. and Mrs. Nester had the followings items of financial support this year: Social Security benefits...$ 26,890 Dividends and interest...78,600 Pension from Mr. Nester's former employer...28,200 Pension from Mrs. Nester's former employer...34,700 Bo..
The net effect of a stock repurchase is ________.
Demand corporation is planning a bond issue with an escalating coupon rate. the annual coupon rate will be 4 percent for the first 3 years, 5 percent for the subsequent 3 years, and 6 percent for the final 3 years. if bonds of this risk are yielding ..
The spot €:$ is equal to 1.1795. The one-year interest rates on the Eurocurrency market are 4% in Euros and 5% in U.S. dollars. What is the one-year forward exchange rate?
What annual interest rate do you need for an investment to be worth $10,207.73 seven years in the future with quarterly compouding if you deposit $6,500 today?
Given the following, compute the cost of externally generated equity (new equity) using the DCF approach: The par value of the firms outstanding 20 year 8% annual coupon debt is 1,000 and the debt currently has a market value of 800. The firm's tax r..
Sally Johnson loaned a friend $10,000 at 15% interest, compounded annually. The loan will be paid in five equal end-of-year payments. Sally expects the inflation rate to be 12%. After taking inflation into account, what rate of return is Sally receiv..
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