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Daniel's Market has sales of $36,600, costs of $28,400, depreciation expense of $3,100, and interest expense of $1,500. If the tax rate is 34 percent, what is the operating cash flow, OCF?
Chevelle, Inc. has sales of $487,000 and costs of $394,500. The depreciation expense is $43,800. Interest paid equals $18,200 and dividends paid equal $6,500. The tax rate is 35 percent. What is the addition to retained earnings?
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,420,000, $144,000 in the common stock account and $2,690,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed long-term debt of $1..
What are some arguments in favor of and against mandatory auto insurance? Which would be your preference and why? What should be the main factors used to determine the amount a person pays for auto insurance? Consider such factors as driving record, ..
You have just purchased a home by borrowing $400,000 for 30-years at a fixed APR of 3.87%. What is the monthly mortgage payment? (Hint: A mortgage is just an annuity where the borrowed amount is the present value of the annuity. So, use the annuity f..
Jeff wants to purchase a new automobile. The one he has selected will cost $25,000 including all fees (e.g., tax, title, and licensing). Jeff has saved $10,000 to use as a down payment. He plans to finance the balance though a loan. The loan would be..
It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and levera..
A Pharmaceutical manufacture has projected net profits for a new drug that is being released to the market over the next five years: Use a spreadsheet to find the net present value of these cash flows for a discount rate of 3%.
Josh has decided to take a course at the local community college that could help him get a promotion at work. The course begins at 5 p.m. and goes until 9 p.m. on Monday nights. Josh normally works until 5 p.m. each day, but because of the drive time..
You have just purchased a home by borrowing $400,000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly. What is the periodic interest rate? (I.e., what is the monthly interest rate?)
You have been assigned the task of using the corporate or free cash flow, model to estimate Petry Corporation's intrinsic value. The firm's WACC is 10.00%, its end-of-year free cash flow is expected to be $90.0 million, the FCFs are expected to grow ..
LLT Company’s stock is currently selling for $105 per share. LLT just paid its annual dividend, so the next one won’t be paid until one year from today. If you required an annual rate of return of 15% on an investment in LLT’s common stock, what amou..
Graser Trucking has $25 billion in assets, and its tax rate is 30%. Its basic earning power (BEP) ratio is 19%, and its return on assets (ROA) is 4%. What is its times-interest-earned (TIE) ratio?
Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81,406, a payback period of 2.48 years, and an AAR of 9.31 percent. Project B has an NPV of $82,909, a payback period of 2.57 years, and an AAR of 9.2..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
The common stock of Eddie's Engines, Inc. sells for $37.43 a share. The stock is expected to pay $3.40 per share next year. Eddie's has established a pattern of increasing their dividends by 5.5 percent annually and expects to continue doing so. What..
General Mills has a $1,000 par value, 17-year to maturity bond outstanding with an annual coupon rate of 9.72 percent per year, paid semiannually. Market interest rates on similar bonds are 11.60 percent. Calculate the bond’s price today.
Measuring and Monitoring Strategy
What is the EOQ for a firm that sells 5,000 units when the cost of placing an order is $5 and the carrying cost are $3.50 per unit? How long will the EOQ last? How many orders are placed annually?
A call with a strike price of $70 costs $7.38. A put with the same strike price and expiration date costs $3.56. If you create a straddle, what is the initial cash flow? If it's a cash outflow, answer in a negative number.
Assume you have just graduated from college with a degree in finance and you are trying to explain to your boss the importance of identifying and using the appropriate cash flows when you make financial decisions. Explain incremental cash flows to yo..
What is the approximate yield to maturity for a $1000 par value bond selling for $925 that matures in 8 years and pays a 10 percent coupon that is paid semiannually? What is the current price of a $1000 par value bond maturing in 12 years with a coup..
Your organization has been asked to invest in a continuing care retirement center. Your investment will be $600,000 per year for the next five years. After five years, cash flows will be $400,000 per year for the next 15 years. If your discount rate ..
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