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Office Automation, Inc., must choose between two copiers, the XX40 or the RH45. The XX40 costs $1,100 and will last for 3 years. The copier will require a real aftertax cost of $140 per year after all relevant expenses. The RH45 costs $1,600 and will last 5 years. The real aftertax cost for the RH45 will be $115 per year. All cash flows occur at the end of the year. The inflation rate is expected to be 5 percent per year, and the nominal discount rate is 14 percent. Calculate the EAC for each copier.
Patience, Inc., just paid a dividend of $2.95 per share on its stock. The dividends are expected to grow at a constant rate of 5.00 percent per year, indefinitely. Assume investors require an 11 percent return on this stock.
Joe secured a loan of $14,000 five years ago from a bank for use toward his college expenses. The bank charges interest at the rate of 3%/year compounded monthly on his loan. Now that he has graduated from college, Joe wishes to repay the loan by amo..
Arvil Synchronistics will pay a dividend of 1.20 per share this year. It is expected that this dividend will grow by 3% each year in the future. What will be the current value of a single share of Avril's stock if the firm's equity cost of capital is..
Contoso Corp just paid a $2 dividend per share. It is anticipated that the dividend payments grow at a rate of 5% a year (forever). If the stock of Contoso Corp sells for $50 per share, what is the required rate of return?
the GLDR project is an attempt to create a uniform international tax close so that companies can’t show all of their income in low tax countries. an inversion is when a company changes its country of incorporation in an attempt to reduce taxes. the U..
Robert would like his wife to receive a pure endowment of $100,000 when she retires at 55, 15 years from now. How much must he deposit annually if the money is worth 5%?
The existing spot rate of the Canadian dollar is $.85. The premium on a Canadian dollar put option is $.04.
Under the terms of an interest rate swap, The LIBOR rate is 11% per annum far all maturities compounded continuously. What is the value of the swap.
Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $4 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as project..
A company has 10 independent projects with a positive NPV but, management can only accept 7 projects. Strictly following financial theory, is management acting in shareholders’ best interest?
Company XYZ has $120 million of assets, 100% financed with equity, and that the firm has 6 million shares of stock outstanding valued at $20 per share. Suppose company XYZ has operating earnings of $27 million. Compute the earnings per share for the ..
Construct a three- step binomial tree to calculate a price for a 3-month put option on an asset at a strike of 101. The current price is 100. At each step, the price either rises of falls by a factor of 2% (that is, either multiplied by 1.02 or divid..
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