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Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,373 at the end of each of the next 4 years. Each project has a WACC of 10.75%, and Project S can be repeated with no changes in its cash flows. The controller prefers Project S, but the CFO prefers Project L. How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS?
Neal's Nails has an 11% return on assets and a 30% dividend payout ratio. What is the internal growth rate?
If sales increase by 10, 000 units in the coming year, how much increase in income is expected?
A stock has a beta of 1.25 and an expected return of 14 percent. A risk-free asset currently earns 2.1 percent.
Explain how to apply the cost of trade credit techniques to assess the cost of trade credit for an organization. What do discounts really cost an organization?
Johnson currently maintains an average demand deposit of $80k. Estimate the cost of the line of credit to Johnson. c. Which source of credit should Johnson select, Why?
Chandeliers Corp. has no debt but can borrow at 7.4 percent. Calculate WACC
The expected rate of return on an investment with a beta of 2 is twice as high as the expected rate of return of the market portfolio.
Computation of break even points - how large can his fixed operating costs be if he is to meet his profit target and what is his breakeven level of sales at the level of fixed operating costs determined.
What other major factor must be considered to estimate the project's Net Present Value? Why?
If the stock price increases to $73 per share and the premium stays the same, what is the expected Market Price of the convertible?
Describe the CAPM and the APT and identify the factor(s) that determines returns in each?
The Corporation is planning two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%.
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