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A Company is considering two alternative methods of producing a new product. The relevant data concerning the alternatives are presented below. Alternative I Alternative II Initial Investment $50,000 $110,000 Annual receipts $36,000 $50,000 Annual Disbursements $16,000 $10,000 Annual depreciation $12,000 $16,000 Expected Life 5 years 7 years Salvage Value $0 $0 At the end of the useful life of whatever equipment is chosen the product will be discontinued. The company's tax rate is 50 percent, and its cost of capital is 11 percent. Calculate the internal rate of return for each alternative.
Today, you want to sell a $1,000 face value zero coupon bond you currently own. The bond matures in 4.5 years. How much will you receive for your bond if the market yield to maturity is currently 5.33 percent? Ignore any accrued interest.
If the electronic claims system costs $30,000 a year to lease and operate, should it be adopted? (Assume that the entire receivables balance has to be financed)
Suppose you expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of next three years. You believe the stock will sell for $20 at the end of the third year.
Evaluate the effect of interest rates in foreign countries and the rate of exchange with foreign currencies on investment in the United States.
Karl Stick is president of Stock Corporation. He also owns 100% of its stock. Karl's salary is $120,000. At the end of the year, Karl was paid a bonus of $100,000 because the firm had a good year.
What is the estimated annual change to Year 1-n cash flow due to depreciation from a capital budgeting investment costing $100,000 with a useful life of 12 years and a salvage value of $28,000? Assume a 34% tax rate and straight-line depreciation.
I have to write a 850 word paper about the coffee company, Starbucks. I have to define the following corporate risk terms and describe their relevance to Starbucks.
If EBIT is $750,000, which plan will result in higher EPS?
Assume the following facts about a firm's financing in the next year. Calculate the weighted cost of the capital of this project.
Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its nonfree trade credit?..
The company's WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?
The probability of a boom is 63 percent while the probability of a recession is 37 percent. What is the variance of the returns on RTF, Inc. stock?
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