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Cash Flows: A new project will generate sales of $74 million, costs of $42 million, and depreciation expense of $10 million in the coming year. The firm's tax rate is 35%. Calculate cash flow for the year by using all three methods listed below, and confirm that they are equal. (LO2).
Method #1: Dollars in Minus Dollars Out(Operating cash flow = revenues - cash expenses - taxes)
Method #2: Adjusted Accounting Profits(Operating cash flow = after tax profit + depreciation)
Method #3: Add back depreciation tax shield(Operating cash flow = (revenues - cash expenses) x (1- tax rate) + tax rate x depreciation
A firm can issue an 8 year public debt issue at par with an 11 percent coupon in the domestic market. It can also issue 11.25 percent Eurobonds. If all other expenses are equal, which issue offers the firm the lower borrowing cost?
Select an asset you would like to purchase in five years. Compute how much you need to save for the next five years to purchase this asset
One year treasury securities yield 6.9%, while two year Treasury securities yield 7.2%. If the expectations theory is correct (that is, the maturity risk premium = 0)
Suppose your Customer, General Television, produces televisions and during the current year acquired Micro Engineering, Inc., which manufactured flat panel plasma screens for computers so that it could compete in the market for flat panel televisions..
A grandmother want a plan to finance her new grandchild's college education. She has $62,000 to invest. Search the internet & locate a long-range investment CD, Savings Bond, plan, etc, for the grandmother.
Garrett Corporation has been going through a difficult financial period. Over the past three year, its stock price has dropped from $50 to $18 per share. Throughout this downturn, Garrett has managed to pay a $1 dividend every year.
ABC company had a taxable income of $196,664 from operations after all operating costs but before interest charges of $56,991, dividends received of $61,067, dividends paid of $5,000, and income taxes. What is the firm's income tax liability?
The given trial balance was prepared for Gifts, Etc. on Dec. 31, 2010, after the closing entries were posted. Gifts etc. had the following transactions in 2011.
As a foreign exchange trader at Sumitomo Bank, one of your customers would like the yen quote on Australian dollars. Current market rates are:
Leslie receive $2000 a month and rents an apartment for $600 a month, and also has a credit card with an yearly interest rate of 7 percent and a balance of $1500.
Find intrinsic value by discounting each annual dividend by (1+k)^n where n=number of years, summing them and adding the price in step 3 discounted by (1+k)^4.
As the bank is also doing lot of record keeping, firm’s administrative cost would reduce by $2,000 per month. What suggestion would you provide firm with respect to proposed cash management suppose the firm’s opportunity cost is 12%?
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