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1. Discuss how capital budgeting procedures might be used by each of the following:
a. Personnel managers
b. Research and development staffs
c. Advertising executives
2. What is a mutually exclusive investment project? An independent project? A contingent project? Give an example of each.
3. What effect does capital rationing have on a firm's ability to maximize shareholder wealth?
4. What are the primary types of capital investment projects? Does a project's type influence how it is analyzed?
5. Cash flows for a particular project should be measured on an incremental basis and should consider all the indirect effects of the project. What does this involve?
6. What factors should be considered when estimating a project's NINV?
7. Depreciation is a noncash expense; why is it considered when estimating a project's net cash flows?
Which of these should cause the dollar to appreciate?
Calculate the formula value of the right for both the rights-on and the ex-rights cases. How much is the market price of the company's stock expected to drop on the ex-rights date, all other things being equal? Why?
Both Bond Sam and Bond Dave have 8 percent coupons, make semi-annual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the pe..
Grandview Clinic has fixed costs of $2 million and an average variable cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates that the population..
IBM’s stock is currently selling at $ 11.44. This year the firm had earnings per share of $2.80 and the current dividend is $ 0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk free rate is 10 percent and the expected m..
problem 1on completion of mba eddie and mike were so pleased with the amount of useful and interesting knowledge that
ART has come out with a new and improved product. As a result, the firm projects an ROE of 30%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3.0 per share. Investors expect a 16% rate of return on the stock. What pri..
Which has a longer Macaulay's duration: a $ 1 million face value zero coupon bond with a two- year maturity and a yield of 6 percent, or a $ 1 million face value coupon bond with a two year maturity that pays 6 percent coupon interest? Explain your r..
Assume that in 2009, a Morgan silver dollar minted in 1888 sold for $7,450. What was the rate of return on this investment?
A certain fluidized-bed combustion vessel has an investment cost of $110,000, a life for 10 years, and negligible market (resale) value. Annual costs of materials, maintenance, and electric power for the vessel are expected to total $11,000.
Best Lodging has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 6 percent coupon. The current price is quoted at 101. What is the yield to maturity?
You want to borrow $36,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $750, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?
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