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You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $34.80 Variable costs per abalone = $5.90 Fixed costs per year = $373,000 Depreciation per year = $118,000 Tax rate = 35% The discount rate for the company is 15 percent, the initial investment in equipment is $826,000, and the project’s economic life is seven years. Assume the equipment is depreciated on a straight-line basis over the project’s life. a. What is the accounting break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Accounting break-even level units b. What is the financial break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Financial break-even level units
Identify the coverage that fills in the coverage gap that arises when the negligent party meets the financial responsibility law of the state, but the auto accident victim has losses in excess of the negligent driver’s liability limit. In a populatio..
A triple A rated company borrows $100 millions interest only loan for a 10 year period at fixed rate of 5.5 percent. Assuming the company is in the 35 percent tax bracket. What will be the present value of the tax shield over the ten year period assu..
Do the computations for the example below. Show the computations step by step, so Mr. Hillbrandt can easily follow your examples. 1. The company’s common stock dividends are anticipated to grow at a constant 5.5% growth rate per year going forward. T..
You are holding a bond with an annual coupon rate of 3.5% that matures in 11 years. Bonds recently issued of similar risk have a coupon rate of 4%. What should your bond sell for in the secondary market?
Project K costs $52125 today. Its expected cash inflows are $12000/year for 8 years. With a WACC of 14%, what is the project’s NPV, IRR, MIRR, payback, and discounted payback?
Please explain how agency problems may lead to non value-maximizing motives for mergers. Discuss the various academic theories offered as the rationale for motives induced by the agency problem.
A company has two bonds outstanding. The first matures after five years and it has a coupon rate of 3%. The second matures after ten years and it has a coupon rate of 5%. Interest rates are currently 7%. What is the present value of each $1,000 bond?..
The Corner Grocer has a 7-year, 6 percent semi-annual coupon bond outstanding with a $1,000 par value. The bond has a yield to maturity of 5.5 percent. Show mathematically what happens if the market yield suddenly increases to 7 percent. Elaborate in..
If a preferred stock is of the cumulative type
The expected rate of return on the market portfolio is 9.75% and the risk–free rate of return is 1.75%. The standard deviation of the market portfolio is 19%. What is the representative investor’s average degree of risk aversion?
Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 9 percent annual coupon. Calculate the implied value of the warrants attached to each bond. Discuss 3 advantages to the investor of purchasin..
Stock X has an average realized return of 24.8% and stock Z has an average realized return of -3.1%. The variances for stock X and stock Z are 0.125447467 and 0.032239975 respectively. Covariance is 0.045469287. The variance on a portfolio that is ma..
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