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Suppose Lucent Technologies has an equity costof capital of 10%, market capitalization of $10.8 billion, and anenterprise value of $14.4 billion. Suppose Lucent's debt cost of capital is 6.1% and its marginal tax rate is 35%.a.) What is Lucent's WACC?b.) If Lucent maintains a constant debt-equityratio, what is the value of a project with average risk and thefollowing free cash flows?Year 0 1 2 3FCF -100 50 100 70c.) If Lucent maintains its debt-equity ratio, whatis the debt capacity of the project in part (b)?d.) What is Lucent's unlevered cost of capital?e.) What is the unlevered value of the project?f.) What are the income tax shields from the project? What is their present value?g.) Show that the APV of Lucent's projec tmatches the value computed using the WACC method.h.) What is the free cashflow to equity for this project?i.) What is its NPV computed using the FTEmethod? How does it compare with the NPV based on the WACCmethod?
What is the annual coupon rate for a $1000 face value bond with two years until maturity and a price of $1,026.39, if the appropriate discount rate is 9% per year? (You may assume that the next coupon payment is due one year from now.)
Is it the total cost of the issue, the cost per share or the cost per $1 of investment in the stock?
What is the duration of a bond porfolio that is equally weighted between three; one with duration 3 years, another with duration 12 years and the third with duration 18 years? Please show work, will rate high.
Suppose you are planning the purchase of an investment that would pay you $5,000 per year for years 1-5, $3,000 per year for years 6-8, and $2,000 per year for years 9 and 10.
Vang, Inc., has an average collection period of 27 days. It's average daily investment in receivables is $86,000. What is the receivables turnover? What are annual credit sales?
Devon Automotive estimates that it takes the company about 62 days to collect cash from customers on finished goods from the day it receives raw materials, and it takes about 67 days to pay its suppliers. What is the company's cash conversion cycl..
Baker Corporation has a product that sells for $20 per unit. The variable costs are $12 per unit, and fixed costs total $30,000 every year.
The Famous Amos Chocolate Chip Cookie. Soon the entrepreneur became a national personality renowned not only for his cookies but for his ebullient and outgoing persona as well.
If the appropriate interest rate is 8 percent, what kind of deal did the athelete snag? Assume all payments other than the first $4.00 million are paid at the end of the year.
What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually.
If biggie mart could earn 3.5% on its marketable securities, how much would the firm earn per year from such an arrangement?
Describe the challenge of estimating or coming with the good feel for "cost of equity capital" or rate of return that you feel Under Armour investors require as the minimum rate of return that they expect of require Under Armour to earn on their in..
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