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Your firm is considering a new project. The firm is 100% equity financed, and you believe the project will have about the same level of risk as the firm. You know that your firm has a beta of 1.4, the risk-free rate is 2.4 percent, and you expect the market return to be 10.0 percent. You have the following cash flow estimates, quoted in nominal dollars.
Year Nominal Dollars
0 $(35,000.00)
1 $12,500.00
2 $15,000.00
3 $17,000.00
What is the NPV of the project?
Assume sigma=0.15, nu=0.10, and current stock price $32. Monthly interest rate is 1%. Compute present values of the following options expiring in 3 months. (a) A European call option with strike $30, assuming $2 dividend in 40 days.
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A company has preferred stock that can be sold for $28 per share. The preferred stock pays an annual dividend of 5% based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.50 per share. The company's margina..
Summers Corp. currently has an EPS of $3.30, and the benchmark PE for the company is 32. Earnings are expected to grow at 5 percent per year. What is your estimate of the current stock price? Assuming the company pays no dividends, what is the implie..
Which of these cost methods does the instructor suggest a pizza business might use, given the variability of the cost of cheese? Standard costing Job order costing Direct costing Unit costing. Todd owns a small factory that makes basketballs for prof..
Roosevelt Corporation acquires 55% of DePaul Company for $40,000,000 on January 1, Year 6. At the time of acquisition, DePaul has total net assets with Fair value of $25,000,000. Compute the value of Roosevelt Corporation’s investment in DePaul Compa..
Discuss government rescue of failed banks concept - •Review any complicated or confusing concepts. Strive to provide fresh insight to each other.
A manufacturer is considering a switch from manufacturers’ representatives to an internal sales force. The following cost estimates are available. Manufacturers’ reps are paid 8.8% commission and incur $655,000 in fixed costs; while an internal sales..
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