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Mills Mining is considering an expansion project. The proposed project has the following features. The project has an initial cost of $554--this is also the amount which can be depreciated using the following depreciation schedule: Year 1 is 33%, Year 2 is 45%, Year 3 is 15%, and Year 4 is 7%. If the project is undertaken, at t = 0 the company will need to increase its inventories by $72, and its accounts payable will rise by $72. This net operating working capital will be recovered at the end of the projects life (t = 4). If the project is undertaken, the company will realize an additional $519 in sales over each of the next four years (t = 1, 2, 3, 4). The company's operating cost (not including depreciation) will equal $405 a year. The company's tax rate is 40 percent. At t = 4, the projects economic life is complete, but it will have a salvage value of $170. The projects WACC= 10 percent. What are the one-time cash flows associated with ending the project (i.e. terminal Cash Flows)?
A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 80% debt. The interest rate on the debt would be 8%.
Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format.
Yare hired as a financial planner. work out an amortization schedule for a nine-year loan of $90,000 which requires equal annual payments. The interest rate is 4.5% per year.
Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million.
ou want to buy a new sports car from Muscle Motors for $73,000. The contract is in the form of a 60-month annuity due at a 7.00 percent APR. What will your monthly payment be
A project has a WACC of 8% and an initial cash outlay of $1000. The life of this project is 4 years and cash flows are expected to be $400 per year.
You are evaluating two different silicon wafer milling machines. The Techron I costs $234,000, has a three-year life, and has pretax operating costs of $61,000 per year.
Booher Book Stores has a beta of 1.3. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 6.5%. The market risk premium is 6%. What is the estimated cost of common equity using the CAPM
At Jarvie's current shop, Bad Dog Cycles, each employee is allowed to purchase four bicycles a year at a discount. Bad Dog has an average gross profit percentage on bicycles of 25 percent.
If Stock X has an expected return of 15.35 percent and a beta of 1.55, and Stock Y has an expected return of 9.4 percent and a beta of 0.7, how much money will you invest in Stock Y
That Wich Corp. had additions to retained earnings for the year just ended of $328,000. The firm paid out $176,000 in cash dividends, and it has ending total equity of $4.81 million.
Suppose a risk averse investor can choose a portfolio consisting of 2 assets with independently distributed returns, both of which have identical means (r1=r2) and identical variances.
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