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Mideque, inc. is considering a project to produce pens. It is estimates that the initial cost of the equipment including transportation installation and so forth will be $24,000. Mideque also estimates that the revenue (sales) each year over the five-year life of the project will be $15,000. the other yearly expenses (e.g., COGS, wages and salaries, etc) will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15% per year. The loan will be repaid at the rate of $2,000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50%. Assume that this is a replacement project. The old equipment can ve sold for $10,000. It was bought five years ago for $22,000 and was assumed to last for 10 years. Obtain the annual cash flow of the last period. Options A. 6400 B. 5300 C. 6000 D. 11000
Assume that the average firm in your company's industry is expected to grow at a constant rate of 7% and that its dividend yield is 5%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $25,200,000 be paid to the president upon the completion of her first 9 years of service. The company wants to set aside an eq..
You are the portfolio manager for a mutual fund. Your fund has an expected return of 15% with a standard deviation of 24% and the T-bill rate is 3%. Your client chooses to invest 60% of her retirement pension in your fund and the remaining 40% in T-b..
Review the requirements of the Chapter 3 Mini-Case, parts b through h. Then apply those requirements to do an analysis of STARBUCKS CORPORATION (TICKER: SBUX). Don't complete the mini case itself, just STARBUCKS. Do the analysis on the basis of the f..
Compute the price of a 5.8 percent coupon bond with 10 years left to maturity and a market interest rate of 9.4 percent. compute the current bond yield? compute the yield to maturity? Compute the taxable equivalent yield (for an investor in the 30 pe..
Calculate a table of interest rates for 5 years based on the following information: 1. The pure interest rate is 2% 2. Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5% 3. The default risk is .1% for year one and increases by .1% over..
An arbitrager at Deutsche Bank notices that the yield on Brazilian Real 6-month risk-free bills is 5.5% per annum and the yield on U.S. 6-month T-bills is 7% per annum. What transactions will the arbitrageur undertake to realize arbitrage profits in ..
You own 500 shares of Stock A at a price of $60 per share, 405 shares of Stock B at $80 per share, and 500 shares of Stock C at $41 per share. The betas for the stocks are .8, 1.8, and .7, respectively. What is the beta of your portfolio?
Has there been any new legislation passed to encourage banks to lend? How about consumer protection legislation?
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 13.08 percent coupon rate and paid interest annually. It is now 16 years later. The current market rate of interest on the Bright Sun bonds is 10.94 perce..
What are the tax considerations of the Sears and Kmart merger in regards to: Stock purchase tax implementation. Seller tax benefits and double taxation. Use of net operating losses as tax shelter
Calculate the discount period for the bank to wait to receive its money: date of note April 12 length of note 45 days date note discounted May 2 what is the discount period?
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