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Fox Enterprises is considering expanding into the growing laser copier business. Fox estimates that this expansion will cost $1.8 million and will generate a 20 year stream of expected net cash flows amounting to $400,000 per year. The company's weighted cost of capital is 15%.
A. Compute the net present value of the laser copier project using the company's weighted cost of capital and the expected cash flows from the project.
B. Using the risk-adjusted discount rate approach, management has decided that this project has substantially more risk than average and has decided that it requires a 24 percent expected rate of return on projects like this. Recompute the risk-adjusted net present value of this project.
suppose that the risk-free rate is currently 9% per annum(quoted as an APR). You read of a strange security that offers a risk-free payoff of 10$ per month for the next 5 years
In five years, the aftertax value of the land will be $5.7 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land
Every three months, she deposits $400 in her bank account, which earns 8 percent annually but is compounded quarterly. On December 31, 2007, she used the entire balance in her bank account
Dandee Lions, Inc., has a cash balance of $97,000, accounts payable of $212,000, inventory of $195,000, accounts receivable of $311,000, notes payable of $57,000, and accrued wages and taxes of $71,000.
Thirsty Cactus Corp. just paid a dividend of $1.20 per share. The dividends are expected to grow at 15 percent for the next eight years and then level off to a growth rate of 5 percent indefinitely.
Cantona Industries has a target captial structure consisting of 40% debt, 5% preferred stock, and 55% common equity. The before-tax YTM on Cantona's long-term bonds is 9.5%, its cost of preferred stock is 8%
A number of overweight Americans filed a class action suit for deceptive trade practices and negligence against McDonald's Corporation, the fast-food chain famous for its hamburgers, French fries, and chicken nuggets.
If the investor also purchases the put (ie. Constructs a protective put), what is the combined cash outflow. What is the maximum potential loss and maximum potential profit from this protective put
Miller Brothers is considering a project that will produce cash inflows of $61,500, $72,800, $84,600, and $68,000 a year for the next four years, respectively. What is the internal rate of return if the initial cost of the project is $225,000
Bond P is a premium bond with a 12 percent coupon. Bond D is a 7 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have seven years to maturity.
A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,592 an ounce, but the price is extremely volatile and could fall as low as $1,512 or rise as high as $1,672 in the next month.
Erron Corporation wants to issue five-year notes but investors require a credit risk spread of 3 percentage points. What is the anticipated coupon rate on the Erron notes if the treasury note paying an annual coupon of 5.06
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