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Houston Inc. is considering a project which involves building a new refrigerated warehouse which will cost$7,000,000 at t = 0 and which is expected to have operating cash flows of $500,000 at the end of each of the next 20 years. However, repairs which will cost $1,000,000 must be incurred at the end of the 10th year. Thus, at the end of Year 10 there will be a $500,000 operating cash inflow and an outflow of $1,000,000 for repairs. If Houston's required rate of return is 12 percent, what is the project's MIRR in percent?
Suppose a firm in planning to invest $ 1,000,000 to invest in a risk free asset and a risky asset A. Assume that µf = 0.05, µA = 0.10 and ?A = 0.17. The company has capital reserves that could cover $ 100, 000 but no more and would like as a result t..
A firm has had the indicated earnings per share over the last three years: If the firm's dividend policy was based on a constant payout ratio of 50 percent, determine the annual dividend for each year. How does asymmetric information affect the firm’..
What is the current (time 0) value of a share of Highland stock? What value would you project for a share of stock at the beginning of year 3?
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
Fly Away, Inc., has balance sheet equity of $5.1 million. At the same time, the income statement shows net income of $724,200. The company paid dividends of $416,415 and has 150,000 shares of stock outstanding. If the benchmark PE ratio is 20, what i..
FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% in January 2011 and 5.03% in January 2010. If you have a $230,000, 5%, 30-year mortgage, how much interest will you save if..
You have been offered the opportunity to invest in a project that will pay $2,769 per year at the end of years one through three and $12,078 per year at the end of years four and five. If the appropriate discount rate is 18.8 percent per year, what i..
The manager of a grocery store has taken a random sample of 100 customers. The average length of time it took the customers in the sample to check out was 3.1 minutes. The population standard deviation is known to be 0.5 minutes.
Artie's Soccer Ball Company is considering a project with the following cash flows: Initial outlay = $750,000 Incremental after-tax cash flows from operations Years 1-4 = $250,000 per year Compute the NPV of this project if the company's discount rat..
CCC Corp has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage poin..
Construct a pro forma income statement for the first year and second year for the following assumptions: • Units of Sales in Year 1: 110,000. •Price per Unit: $11. • Variable cost per unit: 25%. • Fixed Costs: $129,000.
The company with the common equity accounts shown here has declared a 4-for-one stock split when the market value of its stock is $33 per share. The firm’s 80-cent per share cash dividend on the new (post split) shares represents an increase of 25 pe..
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