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Neon Corporation’s stock returns have a covariance with the market portfolio of .0455. The standard deviation of the returns on the market portfolio is 20 percent, and the expected market risk premium is 7.9 percent. The company has bonds outstanding with a total market value of $55.04 million and a yield to maturity of 6.9 percent. The company also has 4.54 million shares of common stock outstanding, each selling for $24. The company’s CEO considers the current debt–equity ratio optimal. The corporate tax rate is 40 percent, and Treasury bills currently yield 3.8 percent. The company is considering the purchase of additional equipment that would cost $42.04 million. The expected unlevered cash flows from the equipment are $11.84 million per year for five years. Purchasing the equipment will not change the risk level of the company. Calculate the NPV of the project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Assume you have just been hired as a financial analyst by Tennessee Sunshine Inc., a mid-sized Tennessee company that specializes in creating exotic sauces from imported fruits and vegetables. Why might stockholders be indifferent to whether or not a..
The final product of security analysis is a recommendation to buy, sell or hold the stock of a particular company.
JKEB Corporation incurred the following capital gains and losses in tax year 2012: Calculate the net capital gain (loss) for 2012. How is this reported on the 2012 Form 1120? Calculate the amount of capital loss carryback (if any) to tax years 2008 t..
Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%, and the standard deviation of returns to the market portfolio is 20%, answer the following questions: a. You have $100,000 to invest. How should you allocate you..
If the share price falls by 6% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect?
Williams, Inc., has an ROA of 6 percent and a payout ratio of 45 percent. What is its internal growth rate?
Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $818,822, $863,275, $937,250, $1,018,110, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..
You know that the return of Momentum Cyclicals common shares is 1.6 times as sensitive to macroeconomic information as the return of the market. If the risk-free rate of return is 2.45 percent and market risk premium is 5.71 percent, what is Momentum..
Discuss the four components of return on a bond investment over a given holding period.
Calculate the risk premium for each of the following rating classes of? long-term securities, assuming that the yield to maturity (YTM) for comparable Treasuries is 4.11%. The risk premium for securities class AAA. Carl? Foster, a trainee at an inves..
Aqua System Inc. expects to have $16,080,600 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can climate 5 days of float, releasing funds which when invested will earn 13.54 percent ..
Compute the following items for each project. payback period. IRR. MIRR. NPV
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