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A firm is considering the purchase of a machine which would represent an investment of $28 million, and would be depreciated in a straightline basis over 4 years. Sales are expected to be $15 million per year, and operating costs 24% of sales. The company is currently paying $2 million in interest per year, has a tax rate of 40%, and a WACC of 10%. What is the company's free cash flow for year 1 of this project?
Enter your answer in millions of dollars, rounded to 1 decimal, and without the dollar sign For example, if your answer is 10.5678, enter 10.6. Use the minus sign ('-') if cash flow is negative.
Firms with higher growth opportunities (and some research suggest that firms in high growth areas - clusters) tend to maintain greater financial slack. Explain? Basically the financial slack or flexibility will have an impact on/or it's defined by: 1..
Audrey Sanborn has just arranged to purchase a $550,000 vacation home in the Bahamas with a 20 percent down payment.
calculate the required return on King Farm Manufacturing’s common stock.
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What kind of strategic changes in marketing and/or location of production facilities do you think this company should take given these new exchange rates?
Too Green, Inc., is a young start-up company and it expects no dividends on the stock over the next 4 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $3.3 per share dividend in 5 years and will increase t..
The Green Fiddle is considering a project that will produce sales of $87,000 a year for the next four years. The profit margin is 6 percent, the project cost is $96,000, and depreciation is straight-line to a zero book value over the life of the proj..
What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock?
If the correlation between the returns of Security F and Security G is .30, what is the standard deviation of the portfolio?
An insurance company owns $50 million of floating-rate bonds yielding LIBOR plus 1 percent. These loans are financed by $50 million of fixed-rate guaranteed investment contracts (GICs) costing 10 percent. A finance company has $50 million of auto l..
The real risk-free rate is 2%. Inflation is expected to be 2% this year, 3% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0006 x (t - 1), where t = number of years to maturity. What is the nominal interest rate o..
Corporate shareholders are exposed to unlimited liability. Corporations generally face fewer regulations than sole proprietorships.
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