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A firm has a WACC of 13% and is deciding between two mutually exclusive projects. Project A has an initial investment of $62. The additional cash flows for project A are: year 1 = $18, year 2 = $37, year 3 = $51. Project B has an initial investment of $73.The cash flows for project B are: year 1 = $57, year 2 = $42, year 3 = $21. Calculate the payback and NPV for each project.
A portfolio's risk premium and volatility are determined by the fraction that is invested in the market.
Over the past five years a stock produced annual returns of 11%, 16%, 5%, 2%, and 9%, respectively. Based on this information, what is the standard deviation for this stock?
ABC Printing Inc. raised $120 million in new debt and used this to buy back stock. After the recap, ABC's stock price is $7.5. If ABC had 50 million shares of stock before the recap, how many shares, in millions, does it have after the recap? (Enter ..
Five years ago you borrowed 200,000 to finance the purchase of a 240,000 home. The interest rate on this (old) mortgage is 10% MEY, and the level payments were made monthly to amortize the loan over 30 years (you did not curtail the loan in any way, ..
Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 12 percent to evaluate average-risk projects, and it adds or subtracts 2 percentage points to evaluate projects of more or less risk. Which project should Virus S..
Calculate the value of a six-month European call option on the stock with an exercise price of $48.
ACME is deciding where to invest. Project 1 will produce cash flows of $52,000 a year for 6 years. Project 2 has cash flows of $48,000 a year for 8 years. If the interest rate is 15%, which project should ACME select and why?
The next dividend payment by Dizzle, Inc., will be $3.15 per share. The dividends are anticipated to maintain a growth rate of 6.5 percent, forever. Assume the stock currently sells for $49.90 per share. What is the dividend yield? What is the expect..
Waterways prepared the balance sheet and income statement for the irrigation installation division for 2016. Now the company also needs to prepare a cash flow statement for the same division. The comparative balance sheets for Waterways Corporation’s..
Use two decimal places in your answers. All problems are worth one point each except 6a is worth two points. A firm plans to issue $5,000,000 of commercial paper for 30 days. A dealer will issue the paper at $4,985,000 at a fee of $2,000 in advance. ..
What is the project's operating cash flow for the first year (t = 1)?
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) and has a beta of 0.9. The risk-free rate is 3.6%, and the market risk premium is 4.5%. Justus c..
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