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Marge's Campground is considering adding a miniature golf course to its facility. The course equipment she wants would cost $300,000 and would be depreciated on a straight line basis over 10 years with zero salvage value. However, Marge estimates that the project will be run for 4 years only, and a 4-year time horizon will be used. Further, assume that the company can sell the equipment for $200,000 at the end of year 4. Marge estimates the income from the golf fees would be $280,000 a year with $100,000 variable cost. The fixed cost would be $50,000. Ta ‘he project will require $10,000 of net working capital which is recoverable at the end of the project. Assume a 34% marginal tax rate for the company and the project’s required rate of return of 12 percent. a. Calculate annual operating CFs for the miniature golf facility for years 1-4. Show your work. b. What is the BV of the equipment at the end of year 4? Is there a tax liability or tax credit on the sale of the equipment? Calculate total CF for year 4 including the after-tax selling price. c. What is the NPV of this project? Would you accept this project?
Suppose you are facing the following capital budgeting proposal: $100,000 initial cost, to be depreciated straight-line over 5 years to an expected salvage value of $ 5000, 35% tax rate, $45,000 additional revenues for the first year and it is growin..
The firm’s unlevered (asset) beta is 0.77. Book and market values are equal. The firm has $40 million of debt, 5% interest rate, and $60 million of equity outstanding. The market risk premium is 4%.The firm is considering refinancing by selling bonds..
Explain what the Chairman plans to do. Show or describe the steps cause and effect between the Fed’s action and the ultimate rise of interest rates.
Calculate the postmerger earnings per share if the Blanchard shareholders accept an offer of $22 per share in a stock-for-stock exchange.
Relating Present Value to real life, discuss advantages and disadvantages of beginning to draw Social Security Benefits at age 62 vs. waiting to begin drawing them at full retirement age (let's assume 67).
If their dividend grows at 4% annually, and the required return on this stock is 9%, what will be the price of this stock when you sell it in three years?
Current debt is $200, long-term debt is $400, and the long-term debt-to-equity ratio is 2. What is the total debt ratio?
The highest bid of $1.95 million was rejected by the owner, who had purchased the painting at the height of the art market in 1989 for $3.52 million.
Suppose that two factors have been identified for the U.S. economy. what is your revised estimate of the expected rate of return on the stock?
The Lees are considering adding a new piece of equipment that will speed up the process of building the bobble heads. what is the NPV of this investment?
what is its current price? What will the stock price be in three years?
The most recent settlement bond futures price is 103.5. Which of the following four bonds is cheapest to deliver? A) Quoted bond price = 110; conversion factor = 1.0400 B) Quoted bond price = 160; conversion factor = 1.5200 C) Quoted bond price = 131..
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