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Alpha Industries is considering a project with an initial cost of $7.4 million. The project will produce cash inflows of $1.54 million a year for 7 years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +1.5 percent. The firm has a pre-tax cost of debt of 8.6 percent and a cost of equity of 13.7 percent. The debt-equity ratio is .0.65 and the tax rate is 35 percent. What is the net present value of the project?
Computation of arbitrage opportunity and how much would you make on the arbitrage
compare the WACCs calculated in part (d) and discuss the impact of the firm's financial leverage on its WACC and its related risk.
Kim want to separate on the declining value of RST Inc. If the price of RST is currently $60 and has decided to Short-Sell 800 shares; What will her A/C shares look like?
Computation of Internal Rate of Return and The system will be depreciated straight-line to zero over its 5-year life
Herbert purchased a ten year annuity for $96,000 late in 2008. How much of $16,000 received this year will be taxable?
The great grandparents of one of your classmates sold their munitions factory to government in beginning if 1898 during the Spanish-American War for 150,000.
Given the opportunity to invest in one of the three bonds given below, which would you purchase? Suppose an interest rate of 7 percent.
(Annualizing a monthly rate) You credit card statement says which you will be charged 1.05% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being charged?
Corporation Z-prime is like Z in all respects save one: Its growth will stop after year four. In year 5 and afterward, it will pay out all earnings as dividends.
The bond currently sells for $950, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation?
Computation of interest charges using degree of combined leverage and what will be the new level of annual interest charges
The tax rate is 32 percent. The sales price is estimated at $64 a unit, plus or minus 3 percent. What is the earnings before interest and taxes under the base case scenario? Answer A. $46,920 B. $93,160 C. $114,920 D. $69,000 E. $58,480
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