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When DFC is used on their valuation, company ABC for the current year pretax operating income of $750,000. Income has grown 2% annually during the last five years, and is expected to continue growing at that rate for the next two years. Net operating working capital increased by $60,000 during the current year and current year capital spending on long-lived assets exceeded depreciation by $75,000. Both working capital and the excess of capital spending over depreciation are projected to grow at the same rate as operating income. Subsequent to the second year, you believe the pretax operating income growth rate will increase to 3% per year and remain at that level into the foreseeable future. The 10-year Treasury bond rate is 2.5%, the equity risk premium is 5.5%, and the marginal federal, state, and local tax rate is 35%. ABC's beta and its target debt-to-equity ratio are 1.74 and 0.67, respectively. Its pretax cost of borrowing, based on its recent borrowing activities, is 9%. please calculate the enterprise value.
Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?
How different was this decline from the major decline in the 1930s? What are some differences between the two? Why?
Replacement Analysis The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $90,000. What is the NPV of this project?
Summarize the implications of the portfolio return and risk with respect to what you learned about beta and the CAPM.
You recently purchased a stock that is expected to earn 25% in a booming economy, 9% in a normal economy and lose 8% in a recessionary economy. There is a 15% probability of a boom, a 65% chance of a normal economy, and a 10% chance of a recession. W..
Your firm invested $2,497,700 in 310-day commercial paper today. At the end of the investment period (in 310 days) the firm will receive $2,596,100. What is the 310-day holding period rate of return on the investment? What is the effective annual rat..
Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle.
How much does Raviv need to save in issuance fees to make retaining the cash beneficial for its investors
How did we get into this condition? What did we do to get out of it? How can we prevent another such scenario in the future?
The saving component of financial planning focuses on long-term security and includes:
Rhodes Company’s balance sheet showed total current assets of $12,500, all of which were required in operations. Its current liabilities consisted of $2,868 of accounts payable, $1,765 of 6% short-term notes payable to the bank, and $735 of accrued w..
You have accumulated some money for your retirement. You are going to withdraw $88,095 every year at the end of the year for the next 27 years. How much money have you accumulated for your retirement? Your account pays you 5.02 percent per year, comp..
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