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Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.79 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio of .85, a cost of equity of 11.9 percent, and an aftertax cost of debt of 4.7 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +2 per cent to the cost of capital for such risky projects. What is the maximum initial cost of company would be willing to pay for the project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Story brook, Inc. is currently selling for $25.50, with trailing EPS and dividends of $2.25 and $1.31, respectively. The company’s P/E is 11.3, P/B is 7.1, and P/S is 4.3. The ROE is 21 percent, and the profit margin on sales is 8.25 percent. The Tre..
Assume that you have a company and need to evaluate two alternatives, an automatic machine (AM) and a manual machine (MM). Capital investment for these AM and MM are $23,000 and $8,000, respectively. The salvage values for AM and MM are $4,000 and $0..
Consider the following two mutually exclusive alternatives. Each alternative has a 10-year useful life and no salvage value. If the interest rate is 10%, which alternative should be selected? Answer in terms of benefit-cost ratio analysis.
you realize your company would make a significant profit from doing business in China. You also discover that policies on employee welfare, labor relations, etc. are the antithesis of what your CEO firmly believes.
A mutual fund manager expects her portfolio to earn a rate of return of 10% this year. The beta of her portfolio is .9. Assume rate of return available on risk-free assets is 3% and you expect the rate of return on the market portfolio to be 13%. Cal..
The Caughlin Company has a long-term debt ratio of .38 and a current ratio of 1.60. Current liabilities are $940, sales are $6,360, profit margin is 9.7 percent, and ROE is 19.9 percent. What is the amount of the firm’s net fixed assets?
Assume that interest rate parity holds. In both the spot market and the 90-day forward market, 1 Japanese yen = 0.013 dollar. And 90-day risk-free securities yield 2.4% in Japan. What is the yield on 90-day risk-free securities in the United States?
Which form of business structure faces the greatest agency problems? A. sole proprietorship B. general partnership C. limited partnership D. Corporation E. limited liability company
A company just paid a $2 per share dividend on its common stock (D0=$2.00). the dividend is expected to grow at a constant rate of 7 percent per year. the stock currently sells for $42 a share. if the company issues additional stock, it must pay its ..
If a firm buys on trade credit terms of 3/10, net 50 and decides to forgo the trade credit discount and pay on the net day, what is annualized cost of forgoing the discount (assume a 360-day year)? The annualized cost of the trade credit terms of 3/1..
Maggie’s Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total assets were $2,500,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
You are a claims specialist for YYZ Insurance Company and your policyholder has purchased a trampoline to be placed in their backyard. They tell the neighbor’s kids they cannot use the trampoline, but while the policyholder was on vacation one of the..
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