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Suppose Palmer Properties is considering investing $1 million today (i.e., C0 =-1,000,000) on a new project that is expected to last for 10 years. The project is expected to generate annual cash flows of C1 = -250,000; C2 = 150,000, C3 = 200,000 and then $250,000 for period C4 through C10. If the discount rate is 9% and management's payback period cutoff is 6 years:
(a) What is the payback period for the project? Show your work
(b) What is the net present value of the project ? Show your work
(c) What is the internal rate of return on the project ? Show your work
(d) Under which method(s) above should the company accept the project (applying the acceptance rules)? Explain.
The expansion plan can be financed with additional long-term debt at a 12% interest rate or the sale of new common stock at $8 per share. The firm's marginal tax rate is 40%. Determine the indifference level of EBIT for the two financing plans.
Fama's Llamas has a WACC of 10.80 percent. The company's cost of equity is 14.2 percent, and its cost of debt is 8.4 percent. The tax rate is 40 percent.
Calculate the NPV, profitability index, IRR, MIRR, payback and discounted payback of the cash flows in part 1.
What is the amount to use as the annual sales figure when evaluating this project?
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Of the six key methods used to evaluate capital projects, which one do you prefer?
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The financial managers of a company have options when it comes to the capital structure of the company. The usual components include short term debt, preferred stock, long term debt, & common stock.
Explain Decision making on fund management and what will be the outlook for such company
If a firm issues 10,000 shares of common stock with a par value of $5 and for a sales price of $15, what amount would be recorded in the paid-in capital account?
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