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You are given the following information: The Dorkin Company has made an investment of $40,000, which is expected to yield benefits over a five-year period. Annual cash inflows of $90,000 and annual cash outflows of $75,000 are expected, excluding taxes and the depreciation tax shelter. The tax rate is 40%, and the cost of capital is 8%. Dorkin Company uses straight-line depreciation.
a) Compute the NPV of the investment.
b) On investigation, you discover that no adjustments have been made for inflation or price-level changes. The data for the first year are correct, but after that, inflows are expected to increase at 4% per year, outflows are expected to increase at 6% per year, and the annual rate of inflation is expected to be about 6%. Reevaluate the NPV of the project in light of this information.
Cost of Preferred Stock Tunney Industries can issue perpetual preferred stock at a price of $61.00 a share. The stock would pay a constant annual dividend of $5.00 a share. What is the company's cost of preferred stock, rp?
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An investor buys a $1,000, 20 year 7 percent (interest paid semi annually) bond at par. After five years have passed, interest rates are 10 percent. The bondholder holds the bond until maturity how much did the investor lose on the purchase of the bo..
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Express the simple returns in percentages. Compute the sample mean, standard deviation, skewness, excess kurtosis, minimum, and maximum of the percentage simple returns.
PK Software has 8.4 percent coupon bonds on the market with 23 years to maturity. The bonds make semiannual payments and currently sell for 110.25 percent of par. What is the effective annual yield?
To be accepted, projects that are unusually risky should have to earn Internal Rates of Return that are ____ those earned by a firm’s typical projects.
Select a business you are familiar with. Identify the business and then identify and discuss possible dissatisfiers, satisfiers, and exciters/delighters of the business.
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