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ZXC has 20 annual lease payments remaining in its contract. The next one for $2.5m is due in 4 months. The payments decrease with the equipment value by 4% per year. Using a 12% discount rate, what is today’s present value of the remaining lease payments?
Measuring growth: Given that a firm's return on equity is 22% and management plans to retain 39% of earning for investment purposes, what will be the firm's growth rate? If the firm decides to increase its retention ratio, what will happen to the val..
A company has issues one- and two- year bonds providing 8% coupons, payable annually. The yields on the bonds (expressed with continuous compounding) are 6% and 6.6%, respectively. Risk-free rats are 4.5% for all maturities. The recovery rate is 35%...
Modern Medical Devices has a current ratio of 0.5. Which of the following actions would improve (i.e., increase) this ratio? Select one (A-E): A. Use cash to pay off current liabilities. B. Collect some of the current accounts receivable. Assume that..
The Yo-Yo Corporation tries to determine the appropriate cost for retained earnings to be used in capital budgeting analysis. The firm’s beta is 1.98. The rate on six-month T-bills is 2.04%, and the return on the S&P 500 index is 8.82%. What is the a..
Financial Analysis (called Security Analysis on Wall Street) can be less than totally objective. How big a problem do you think this is? What can be done to manage potential conflicts of interest? Maybe we just have to live with it and search out ..
What are three to four line items that appear on an organization's balance sheet? What significance do these items have for the organization?
Champion Bakers uses specialized ovens to bake its bread. One oven costs $860,000 and lasts about 3 years before it needs to be replaced. The annual operating cost per oven is $10,000. What is the equivalent annual cost of an oven if the required rat..
Suppose that you are the manager and sole owner of a highly leveraged company. All the debt will mature in one year. If at that time the value of the company is greater than the face value of the debt, you will pay off the debt. What can you do to in..
In December 1995 Boise Cascade’s stock had a beta of 0.95.The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4% The firm had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; Assume Boise Cascade..
You are planning to save for retirement over the next 30 years. To do this, you will invest $750 a month in a stock account and $250 a month in a bond account. The return of the stock account is expected to be 11 percent, and the bond account will pa..
Al invests $25,500 in a mint condition U S coin. He expects the coin to increase in value by 10 percent a year for the next five years. After that, he anticipates a 11 percent annual increase for the next three years. What is the projected value of t..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.94 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. If the tax rate is 34 percent..
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