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Consider a project to produce solar water heaters. It requires a $10 million investment and offers a level after-tax cash flow of $1.70 million per year for 10 years. The opportunity cost of capital is 11.25%, which reflects the project’s business risk. a. Suppose the project is financed with $6 million of debt and $4 million of equity. The interest rate is 7.25% and the marginal tax rate is 40%. An equal amount of the debt principal will be repaid in each year of the project's 10-year life.
Calculate APV. (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations. Round your answer to the nearest whole number.)
Adjusted present value $
b. If the firm incurs issue costs of $600,000 to raise the $4 million of required equity, what will be the APV? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations. Round your answer to the nearest whole number.)
A $100,000 GNMA passthrough bond issue has a value of $121,718. The value of the interest-only payments is $42,696. What is the value of the principal-only payment? (Omit the "$" sign in your response.) Principal-only payment $
On a personal level, is it better to lease or own vehicles? Remember, this is one of those questions that sound like I am merely asking one’s opinion but ultimately I am seeking expanded research to support those opinions. ;)
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today. what is..
Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..
Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by 2 days. You typically receive 5,500 checks per day. The daily interest rate is .015%. If the bank c..
You receive a $12,000 check from your grandparents for graduation. You decide to save it toward a down payment on a house. You invest it earning 9% per year and you think you will need to have $24,000 saved for the down payment. How long will it be b..
Coogly has outstanding preferred stock That pays a dividend of $4 per share and sells for $82 per share, with a floatation cost of $6 per share. What is the component cost for Coogly's preferred stock? What are the advantages and disadvantages of usi..
The Caughlin Company has a long-term debt ratio of .43 and a current ratio of 1.50. Current liabilities are $990, sales are $6,410, profit margin is 9.3 percent, and ROE is 20.4 percent. What is the amount of the firm’s net fixed assets?
An investment project has annual cash inflows of $3,800, $4,700, $5,900, and $5,100, for the next four years, respectively. The discount rate is 14 percent. What is the discounted payback period for these cash flows if the initial cost is $8,600?
When Vivienne and Paul Jensen’s daughter Heather turned sixteen, they signed a form allowing her to get a driver’s license. Two weeks after she received her license, Heather crashed the family car into a tree. He friend Rebecca, who was in the passen..
Your parents will retire in 21 years. They currently have $310,000 saved, and they think they will need $1,050,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?
New Millennium Company stock sells at P/E ratio of 20.6 times earnings. It is expected to pay dividends of 2.19$ per share in each of the next 5 years and to generate an EPS of 5.23 $ in year 5. Using dividends - and earnings model and 11%discount ra..
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