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Two friends contributed $50,000 each to form a new business. The owners used the amounts contributed to purchase a machine for $100,000 cash. They estimated that the useful life of the machine was five years and the salvage value was $20,000. They rented out the machine to a customer for an annual rental of $25,000 a year for five years. Annual cash operating costs for insurance, taxes, and other items totaled $6,000 annually.
At the end of the fifth year, the owners sold the equipment for $22,000, instead of the $20,000 salvage value initially estimated.
(Hint: Compute the total net income and the total cash flows other than cash flows with owners for the five-year period as a whole.)
A brand manager for ColPal Products must determine how much time to allocate between radio and television advertising during the next month. Market research has provided estimates of the audience exposure for each minute of advertising in each medium..
Identify and explain the objectives of a budgetary control system and discuss the concept of a participative style of budgeting.
Describe the purpose and meaning for each of the five ratio categories. Who uses the information from each category? What constitutes a complete ratio analysis? Why is a complete analysis used over a few key ratios?
The firm currently has $20,000 shares of common stock outstanding, and the previous year's dividends per share were $1.35. Assuming a 34% income tax rate, what was the times interest earned?
Compute the market value of the firm, value of shares and the average cost of capital from the following information.
Over the past few years, the number of start-up companies attracted to either doing business themselves in the cloud, or specifically creating applications for others to use in the cloud, has grown significantly. one of your new board members is very..
Jungle, Inc., has a target debt—equity ratio of 0.8. Its WACC is 10.5 percent, and the tax rate is 35 percent. If Jungle's cost of equity is 15.5 percent, what is the pretax cost of debt? what is the cost of equity?
Calculate the firm's market capitalization and then calculate the enterprise value. b) Use the CAPM formula to determine the firm's cost of equity
Jayhawk Company reports current E&P of $317,500 and accumulated E&P of negative $295,000. Jayhawk distributed $480,000 to its sole shareholder, Christine Rock, on the last day of the year. Christine’s tax basis in her Jayhawk stock is $99,250. What i..
What is the beta of an asset with an expected return of 16%, if the risk-free rate of interest is 6% and the expected market portfolio risk premium is 6%? Accurate to two decimal places.
In response to the financial crisis of 2007, the Federal Reserve has maintained near-zero interest rates for the past several years. The Fed has kept rates low due to slow economic and employment growth during the past few years. Suppose the Fed rais..
A manager believes his firm will earn a 12 percent return next year. His firm has a beta of 1.2, the expected return on the market is 8 percent, and the risk-free rate is 3 percent. Compute the return the firm should earn given its level of risk and ..
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