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N Corporation is considering the acquisition of A Corporation. A Corporation has earnings before interest and tax of $1.75 million, and asset replacement cost approximately equals depreciation. Efficiencies gained through the merger will reduce A’s operating costs by $320,000. Cash flows occur at year-end.
Assuming a 20 percent tax rate and a 10 percent required return, what is the value of A’s capital without a merger?
Assuming a 20 percent tax rate and a 10 percent required return, what is the value of A’s capital after a merger?
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage for 80 percent of the $1,800,000 purchase price. The monthly payment on this loan will be $10,800. What is the APR?
Which of the following is used as the denominator while calculating the present value for a growing perpetuity that begins next period (PVP)?
The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for months, and you believe it is going to move away sharply from the range in the next 3 months. What would be a simple options strategy using a put a..
You are considering the purchase of a common stock whose historical beta is .5. What rate of return should you require from this stock if the current risk free rate of return is 4% and the expected return on an average investment in the market is 11%..
Joe purchased 800 shares of Robotics Stock at $3 per share on 1/1/09. Bill sold the shares on 12/31/09 for $3.45. Robotics stock has a beta of 1.9, the risk-free rate of return is 4%, and the market risk premium is 9%. The required return on Robotics..
A company is growing and doesn't expect to initiate dividents for 10 years, at which time it will pay an annual dividend of $5 per share. At that time, the company expects its dividends to grow at 6% forever. What is the most you would pay today for ..
Erna Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. Erna Corp. also has two bond issues outstanding. What are Erna’s capital structure weights on a book value basis? What a..
A decrease in an asset account such as inventory would be considered a source of cash while a decrease in a liability account such as accounts payable would be considered a use of cash. Trade credit is extended on purchases to a firm’s customers and ..
Ahmad Oil Refinery, Inc. owns an crude oil pipeline. The current production of oil is at the rate of 100 million barrels a year. The current price of crude oil is about $100 a barrel and is rising at the rate of 5% per year forever. what is the prese..
Option Pricing in the Multi-Period Binomial-should be answered by building a 15-period binomial model whose parameters should be calibrated to a Black-Scholes geometric Brownian motion model with: T=.25 years, S0=100, r=2%, σ=30% and a dividend yield..
The McGregor Whisky Company is proposing to market diet scotch. The product will first be test-marketed for two years in southern California at an initial cost of $500,000. This test launch is not expected to produce any profits but should reveal con..
How has Procter and gambles stock performed in the short term and the long term? Discuss the trends and offer the reader you opinion as to why the stock has performed the way it has.
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