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Question - Sunny Inc. is trying to decide whether investing in Project A is a good idea. This project will last 5 years and will not exist after that. Any salvage value will be considered as additional cash flow to be added to the 5th year's free cash flow. The project requires a $1,000,000 initial investment (today) and has the following projected free cash flows. The project is expected to have a salvage value of $200,000 (at the end of 5th year)
Year 1:?? $300,000
Year 2:?? $350,000
Year 3: ??Nothing
Year 4: ??$450,000
Year 5: ??$250,000
Sunny Inc provides the additional information:
D/E ratio: 0.7
Tax Rate: 20%
Most recent bond with a face value of $1000 sold for $950. This bond pays yearly coupon payments and the coupon rate is 6%. The bond has a remaining maturity of 15 years.
The beta for Sunny Inc. is 2. The S&P 500 has an expected return of 12% and the t-bill is 3%. Calculate the Cost of Debt (not taking taxes into consideration).
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
Accounting problems, Draw a detailed timeline incorporating the dividends, calculate the exact Payback Period b) the discounted Payback Period. the IRR, the NPV, the Profitability Index.
Term Structure of Interest Rates
Write a report on Internal Controls
Prepare the bank reconciliation for company.
Create a cost-benefit analysis to evaluate the project
Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
Distinguish between liquidity and profitability.
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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