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Zoso is a rental car company that is trying to determine whether to add 25 cars to its fleet. The company fully depreciates all its rental cars over five years using the straight-line method. The new cars are expected to generate $170,000 per year in earnings before taxes and depreciation for five years. The company is entirely financed by equity and has a 38 percent tax rate. The required return on the companys unlevered equity is 11 percent, and the new fleet will not change the risk of the company.
a. What is the maximum price that the company should be willing to pay for the new fleet of cars if it remains an all-equity company? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
b. Suppose the company can purchase the fleet of cars for $460,000. Additionally, assume the company can issue $380,000 of five-year, 5 percent debt to finance the project. All principal will be repaid in one balloon payment at the end of the fifth year. What is the adjusted present value (APV) of the project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Etonic Inc. is considering an investment of $365,000 in an asset with an economic life of 5 years. The company estimates that the nominal yearly cash revenues and expenses at the end of the 1st year will be $245,000
SGP's pre-merger beta is 2.0, and its post-merger tax rate would be 34%. The risk-free rate is 8% and the market risk premium is 4%. What is the value of SGP to Raymond?
Suppose a futures contract exists on Micromedia stock that expires in two months. Micromedia has a current market price of $200, has a beta of 1.15, a 0% dividend yield, and a standard deviation of .33. The current T-Bill rate is 5% yearly.
A corporation's last dividend was $1. Its dividend growth rate is expected to be constant at 15 percent for two years, after which dividends are expected to grow at a rate of 10% forever. The required return is 12%.
A portfolio P generates an annual return of 16%, a beta of .8, and a standard deviation of 25%. The market index return is 15% and has a standard deviation of 21%. T-bill rate is 3%.
Suppose a firm has a retention ratio of 45 percent, net income of $30.3 million, and 5.3 million shares outstanding. What would be the dividend per share paid out on the firm's stock?
Compute the weighted average cost of capital. (Round your intermediate and final answers to 1 decimal place. Omit the "%" sign in your response.)
A treasury bond is quoted at a price of 106:23 with a 3.50 percent coupon. The bond pays interest semi-annually. Find out the current yield on one of these bonds?
Computation of the bond coupon and current yield and yield to maturity and what annual dollar coupon amount will investors receive
Explain Valuation of perpetual Bond and In what respect is a perpetual bond similar to a non-growth common stock
Describe why does personal growth and development seem more urgent today than they were in the past and where should I look for the resources to support personal growth and development?
How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest? Ignore taxes.
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