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Two projects being considered by Greenwood Resources Company are mutually exclusive and have the following projected cash flows. The firms cost of capital is 8 percent. Year Project BIG Project SMALL 0 -$200,000 -$35,000 1 85,000 16,000 2 85,000 16,000 3 85,000 16,000. Calculate each project's payback. If you apply payback criterion, which investment will you choose? why? 2. Calculate each project's NPV using the firm's cost of capital (discount rate) of 8%. If you apply the NPV criterion, which investment will you choose? Why? 3. Project BIG's IRR is 13.21% and Project SMALL's IRR is 17.62%. According to the IRR decision rule. which Project would be accepted? Why?
You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. What would your return have be..
Assume that you are the President of a company that is currently worth $200 million and has no debt in its capital structure. There are 10 million shareholders and each share is worth $20 per share. You decide to issue $100 million in debt and use th..
You make $8,700 annual deposits into a retirement account that pays 10.1 percent interest compounded monthly. Required: How large will your account balance be in 33 years?
What is the present value of the offer if the discount rate is 10 percent?
On March 20, 2012 you bought 1,000 shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) at $14.00 on 50% margin. The margin loan carries a 8% annual interest rate, paid every 3 months from the day of the purchase. You sold the stock on September ..
In March, a US investor instructs a broker to sell one July put option contract on a stock. The stock price is $42 and the strike price is $40. The option price is $3. Explain what the investor has agreed to. Under what circumstances will the trade p..
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wh..
Determine what happened to the earnings and credit risk exposure of Wells Fargo Bank (www.wellsfargo.com) in the most recent year for which data are available.
Murphy Company's total liabilities on December 31, 2014, amounted to $1,465,200. The debt-to-equity ratio on this date was 1.48 to 1. Net income for 2014 was $260,604, and the profit margin was 5.13%. Determine Murphy's net sales for 2014. Determine ..
Profit Margin and Debt Ratio Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 2.3 Return on assets (ROA) 2% Return on equity (ROE) 8% Calculate Haslam's profit margin. Calculate Haslam's liabilities-to-a..
The board of ABC would like sales to grow to $810,500 in 2017. They plan to keep the dividend payout ratio the same. They know that assets and costs will grow proportionate to sales, but debt and equity will not. What will be the external financing n..
Assuming you are the financial manager of a for-profit hospital, what is the hospital's cost of capital assuming that the hospital has the following capital structure on its Statement of Financial Position. Long-Term Debt: $300M; current Yield to Mat..
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