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Teresa’s manufacturing plant is destroyed by fire. The plant has an adjusted basis of $270,000, and Teresa receives insurance proceeds of $410,000 for the loss. Teresa reinvests $420,000 in a replacement plant.
a) Calculate Teresa’s recognized gain if she elects to utilize the involuntary conversion provision.
b) Calculate Teresa’s basis in the new plant.
The Executive Committee of PLE is debating whether to replace its original tractor model, the PLE-Classic, with a new model, the PLE-Tough, which would appeal to a younger clientele. Whatever tractor chosen will be produced for the next 4 years, afte..
The expected return rate is 12.0 percent and the risk premium in the market is 6.9 percent. Tasaco, lbm, and exxos have betas of 0.827, 0.623 and 0.579 respectively. what are the appropriate expected rates of return for the three securities
James Monroe lives in a structure that resembles a home, but has only one similar and separate structure attached to his dwelling. What type of housing is James most likely living in?
Using the Non-Constant Growth Model, calculate the (intrinsic) value of a stock paying the following dividend and with the given values for the 'required rate of return' ( or 'r') and assumed constant growth rate (or 'g'). The non-constant growth per..
Assume, the stock is sold for $10.50. The dividend just paid is $1 and expected to grow at the rate of 5% annually. What is the required return? What is the dividend yield? What is the capital gains yield?
Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of..
Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 4.80% per year. What is the real risk-free rate of return, r*? Disregard any cross-product terms, i.e., if averaging is required, use the arithme..
The Border Crossing has no debt and a cost of capital of 11.2 percent. Assume the firm switches to a debt-to-equity ratio of .25 and issues bonds at par with a 6.3 percent coupon. What will be its cost of equity after the switch? Ignore taxes.
Calculate the present value of an annuity (as a series of uniform payments) (use Table 7). 2a. Beth has won the $40 million lottery!! She will receive $2million per year for 20 years. If Beth could invest the money at 7% interest what is the $20 mill..
Which of the following are agency costs? 1. Paying a dividend to each existing shareholders. 2. Purchasing new equipment which increases the value of each share of stock. 3. Hiring outside auditors to verify the accuracy of the company finance statem..
You own 400 shares of Stock A at a price of $50 per share, 290 shares of Stock B at $75 per share, and 700 shares of Stock C at $27 per share. The betas for the stocks are .6, 1.2, and .5, respectively. What is the beta of your portfolio?
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 8..
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