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As the new CEO of Pemrose Corp (Carlton Whitfield), you are announcing a bold new expansion plan. This entails building a new factory. The initial cost is $500 million, it will last 8 years and is depreciated straight-line to a book value of 0. Salvage value of the factory at t = 8 is $100 million. Annual sales and costs will be $300 million and $200 million respectively (in all 8 years). Inventories will rise immediately by $15 million and A/P will rise immediately by $30 million. A/R will rise at the end of the first year by $20 million (t 1). All working capital components return to original values at the end of the project's life. WACC-10% and τ = 30%. What is the NPV?
The time to complete a construction project is normally distributed with a mean of 40 weeks and a standard deviation of 5 weeks. For each item below, remember to show your calculations / explain reasoning to receive full credit.
At the end of the fifth year, the capital investment of $100,000 will be returned. What is the internal rate of return compounded annually on this investment?
St. Vincent's Hospital has a target capital structure of 35% debt and 65% equity. Its costs of equity estimate is 13.5% and its cost of tax-exempt debt estimate is 7%. What is the hospital's corporate cost of capital?
Determine the simple and discounted payback period in months if the press can produce 120 gross of bars each month
You wrote ten call option contracts on JIG stock with a strike price of $41 and an option price of $.60. What is your net gain or loss on this investment if the price of JIG is $46.05 on the option expiration date?
In making strategic capital budgeting decisions, which contingency is normally not considered as part of the planning process:
calculate the Terminal Capitalization Rate at the end of a “5-Year hold”,
Cost of Preferred Stock Tunney Industries can issue perpetual preferred stock at a price of $61.50 a share. The stock would pay a constant annual dividend of $5.50 a share. What is the company's cost of preferred stock, rp? Round your answer to two d..
What is the total value of GM before the swap? What is the expected return on equity before the swap?
The following statements concerning callable bonds are all correct EXCEPT: Select one: a. If it is freely callable, the issuer may retire the bond at any time b. If it is non-callable, the issuer may not retire the bond prematurely c.
Is stock research and analysis important when buying and selling stocks in an efficient market?
Your firm needs a computerized machine tool lathe which costs $52,000 and requires $12,200 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category...
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