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1.Beasley Worldwide Data Destruction (BWDD) purchases a new computing center for $200million. They estimate a life of 5 years and a salvage value of $40 million. BDWW uses MACRSdepreciation in the five year category. They also estimate revenue at $100 million a year.
a) What is the Before-Tax Rate of Return?
b) If they pay 50% income taxes, what is the After-Tax Rate of Return?
c) If BDWW’s Before-Tax MARR is 30% and their After-Tax MARR is 17%, should they do thisproject? Why?
Sam invests the amount of $22,750 in the bank today and, in addition, starting a year from today, she will invest an annual annuity of $21,950 for 17 consecutive years. Which of the following comes closest to the value of these investments at the end..
Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project?
RBC requirements may induce bank managers to change their asset composition. Explain why. Determine how a shift from any of the following should affect a bank's required capital. How will each shift affect the bank's profit potential?
What factors should the firm consider in deciding whether to establish a lockbox collection system? What are the primary reasons a firm holds a liquid asset balance?
Pricing a Foreign Target. Alaska Inc. would like to acquire Estoya Corp., which is located in Peru. In initial negotiations, Estoya has asked for a purchase price of 1 billion Peruvian new sol. If Alaska completes the purchase, it would keep Estoya’s..
One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $500 per month. You will charge 16.8 percent interest, compounded daily, on the overdue balance. If the current balance is $17,340,..
Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 2.40, and (5) its r..
What is the beta of a portfolio whose expected return is 10% when the risk-free rate is 3% and the market risk premium is 5%? What is the expected return on the market?
Calculate the cost of capital for Rio Tinto and state two reasons for why it may have declined since the GFC. Justify your answers using theory, calculations and research into current events.
Valuation - corporate bond a $1,000 corporate bond with 20 years to maturity pays a coupon of 7% (semi-annual) and the market required rate of return is a) 6.6% b) 13%. What is the current selling price for a) and b)?
When Owens Corning emerged from bankruptcy in 2006, the debt holders became the sole owners of the company. But the old stockholders were not left entirely empty handed. They were given warrants to buy the new common stock at any point in the next se..
The annual standard deviation of return on Stock A's equity is 37 percent and the correlation coefficient of these returns, with those on a well-diversified portfolio, is 0.62. Comparable numbers of Stock B are 34 percent and 0.94. Which stock is ris..
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