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Atchley Corporation’s last free cash flow was $1.55 million. The free cash flow growth rate is expected to be constant at 1.5% for 2 years, after which free cash flows are expected to grow at a rate of8.0% forever. The firm's weighted average cost of capital (WACC) is 12.0%. Atchley has $3.5 million in short-term debt and $14 million in debt and 1 million shares outstanding. What is the best estimate of the intrinsic stock price?
An investor bought a racehorse for $1 million. The horse's average winnings were $700,000 per year and expenses averaged $200,000 per year. The horse was retired after 3 years, at which time it was sold to a breeder for $175,000. Assuming MACRS depre..
Kingston, Inc. management is considering purchasing a new machine at a cost of $4,129,832. They expect this equipment to produce cash flows of $821,407, $841,261, $853,835, $1,065,425, $1,134,239, and $1,296,663 over the next six years. If the approp..
As the economy moves through a business cycle, there is a pronounced shift in the size of default risk premiums. Briefly explain the default risk premium changes as we move through the business cycle. Why does it change?
Suppose 1 year ago, Miller Company had inventory in Britain valued at 1.5 million Swiss francs. The exchange rate for dollars to Swiss francs was 1 franc=1.15 dollars. Today, the exchange rate is 1 Swiss franc=1.06 U.S. dollars. The inventory in Swit..
Which of the following bonds has a comparatively higher yield to maturity?? Select one: a. ?A one-year bond with a 6.7 percent interest today b. ?A three-year bond with a 5 percent interest today c. ?A two-year bond with a 4 percent interest today d...
On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest dedu..
Your portfolio has a beta of 1.54. The portfolio consists of 16 percent U.S. Treasury bills, 34 percent stock A, and 50 percent stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of stock B?
When a firm holds cash in excess of some necessary minimum, it incurs an opportunity cost. The opportunity cost of excess cash (held in currency or bank deposits) is the interest income that could be earned by the next best use, such as investment in..
Your firm is contemplating the purchase of a new $536,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $52,200 at the end of that time. The tax rate is 34 percent and y..
On January 1, you sold one April S&P 500 Index futures contract at a futures price of 895. If the April futures price is 800 on February 1, your profit would be __________ if you close your position.
A 100,000 loan agreement has payments and inputs as follows. Calculate the XNPV, XIRR, NPV and IRR of the resulting cash flows Item Notes Initial Cash Flow (PV) 10,000.00 Start Date 01-Jan-2008 Interval (Months) 6 Year One 1,000.00 Year Two 1,500.00 ..
When a person dies, the gross estate is:
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