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Assume the discount rate or weighted average cost of capital is 10%. Ignore taxes and depreciation.
A company wants to build a new factory for increased capacity. Using the Net Present Value (NPV) method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:
· Building a new factory will increase capacity by 30%.
· The current capacity is $10 million of sales with a 5% profit margin.
· The factory costs $10 million to build.
· The new capacity will meet the company’s needs for 10 years.
· The factory is worth $14 million over 10 years.
The stock price of Chevron (CVX) closed on March 6 at $87.93 per share. The annual dividend is $4.28 and is not expected to grow. The net income for the year ending 12/31/13 was $4.587 billion. There are 1.88 billion shares outstanding. What is the d..
You are presented a proposal for a project. The project costs $10 million and will produce after-tax cash flows of $2 million at the end of year 1, $4 million at the end of year 2, and $8 million at the end of year 3. What is the NPV of this project ..
Flower Valley Company bonds have a 12.50 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 5 years from now. Compute the value of Flower Valley Company bonds if investors’ required rate of return..
You deposit $800 into a savings account that pays 2.5% compounded annually. How much will you have in the account if you leave the money there for 6 years? You would like to have $30,000 in an account 10 years from now. You find an investment that wo..
Suppose you hold most of your wealth in stock. What kinds of options should you buy or sell in each of the given circumstances?
JPix management is considering a stock split. JPix currently sells for $120 per share and a 3-for-2 stock split is contemplated. What will be the company's stock price following the stock split, assuming that the split has no effect on the total mark..
Suppose you have $100 to invest. If you want to receive $500 in 10 years, what should be your interest rate?
Two investors are evaluating General Electric’s stock for possible purchase. They agree on the expected value of D1 and also on the expected future dividend growth rate. one investor normally holds stocks for 2 years and the other normally holds stoc..
Assume, the stock is sold for $10.50. The dividend just paid is $1 and expected to grow at the rate of 5% annually. What is the required return? What is the dividend yield? What is the capital gains yield?
Explain how the following risks may affect these 3 sources of financing in international capital markets. In addition, explain how these risks may influence a company's international weighted average cost of capital (WACC):
If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the ..
Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.
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