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Corporate Finance - Valuation Analysis
You should provide detailed solutions.
Problem 1-Valuing a patent: Newgene is a bio-technology firm with a patent on a drug called Innovex, which has received FDA approval for use in treating diabetes. Assume you are trying to value the patent and that you have the following estimates for use in the option pricing model:
a. What will be the NPV of the project if the firm starts developing the drug today rather than wait.
b. What is the value of the patent today.
Problem 2 - Value equity in a distressed firm: Assume that you are valuing the equity in a firm whose assets are currently valued at $60 million; the standard deviation in this asset value is 45%. The face value of debt is $90 million (it is zero coupon debt with 10 years left to maturity). The 10-year Treasury bond rate is 6%.
a. Estimate the value of the firm's equity.
b. Estimate the default spread (over and above the risk-free rate) that debt investors would charge for the firm's debt.
A corporation makes a single product that it sells for $18 a unit. Fixed costs are $76,000 per month and the product has a contribution margin ratio is 40 percent.
Woodgate Inc. is considering a project with following after-tax operating cash flows (in millions of dollars): Find out the project's discounted payback period?
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How much will they have to save each year for the next 50 years, in real dollars, to reach your retirement income goal? '
In this task, you will be evaluating a capital project using the weighted cost of capital for a firm using the market value rather than the book value of the components and the capital budgeting techniques presented in this phase.
a financial advisor claims that a particular stock earned a total return of 10 percent last year. during the year the
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in 1626 peter minuit governor of the colony of new netherland bought the island of manhattan from indians paying with
After the issuance of debt, preferred and common stock, calculate the cost of capital for debt, new preferred stock, new common stock, and the weighted average cost of capital, given the execution of the new financing plan to add new capital.
If yes, state very carefully which asset you will buy, which you will sell, and how much (in what proportion).
What are the functions of managerial finance?
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