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A heat exchanger is being installed as part of a plant modernization program. It costs $80,000, including installation, and is expected to reduce the overall plant fuel cost by $20,000 per year. Estimates of the useful life of the heat exchanger range from: an optimistic (with probability 15%) 12 years to a pessimistic (with probability 5%) 4 years with probability 15%. The most likely (with probability 80%) value is 5 years. Assume the heat exchanger has no salvage value at the end of its useful life.
a) Determine the pessimistic, most likely, and optimistic rates of return.b) Use the range of estimates to compute the mean life and determine the estimated before-tax rate of return.c) What is the expected value of the rate of return?
A $1000 face value bond with six years to maturity and a twelve percent semiannual coupon currently sells for $950. What is the yield to maturity?
Boston Chicken is considering two mutually exclusive projects with the following cash flows. What is the crossover rate? If the required rate of return is lower than the crossover rate, which project should be accepted?
New bank started its first day of operations with $6 million in capital. A total of 100 million dollar in checkable deposits is received. The bank makes a 25 million dollar commercial loan and another $25 million in mortgage loans.
Computation of interest payable on Bonds and Journal entry to record issuance of the bond
Journal entries to record issuance of stock, declaration of dividend and payment of dividend - Write journal entries to show the effect of issuance of common stock and preferred stock on January 1, 2008.
Lennon uses the internal rate of return method to evaluate projects. What is Lennon's IRR?
The tax rate is 33 percent and the required return for the project is 15 percent. What is the net present value for this project?
Which of the following should be included in the initial outlay?
Estimate Nutrex's expected return on common equity using the securty market line. C. Calculate the after tax weighted average cost of capital.
Suppose your Customer, General Television, produces televisions and during the current year acquired Micro Engineering, Inc., which manufactured flat panel plasma screens for computers so that it could compete in the market for flat panel televisions..
Please offer me some ideas on article below, paying particular attention to the methodology described, if there's any gap and also the main findings that may occur. Thank you.
What is the best estimate for Morningside's cost of equity? What is the firm's corporate cost of capital?
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