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Consider a firm which is evaluating a project to produce solar water heaters. The project requires a $10 million investment and generates after-tax free cash flows of $1.75 million per year for 10 years. The opportunity cost of capital which reflects the project's business risk equals 12%. With this information answer the following two questions.
(i) Suppose the project is financed with $5 million debt and $5 million equity. The debt is provided as a term loan, which will be repaid in equal installments over the next 10 years. The interest rate on the debt equals 8% and the marginal corporate tax rate is 35%. Should the firm undertake the investment project? Motivate your answer and show all your calculations.
(ii) Suppose you learn that the firm incurs issue costs (in the form of underwriting fees) of $400,000 to raise the $5 million in equity for the project. How would this information affect your project recommendation? Explain your answer.
Intranets can reflect and influence an organisational culture. Discuss the impact of technology on organisational culture in contemporary organisations
It's almost six month later. Chelsea Club is selling for $44. Amanda's options are about to expire and Seth exercises.
What are some of the features that could be included with a bond prospectus that may have an impact on the yield of a new bond issue?
determine the lockbox products available from Wachovia. Discuss the differences between the various lockbox products.
This bond pays $75 per year in coupon payments and had a 20 year maturity last year when she bought it. market interest rates have now risen to 10%. What is the current value of Margot's bond one year later?
Co. signed a 1-year, 12%, $300,000 note payable on July 1, 2015. Interest is due upon maturity of the note. As of December 31, 2015.
Explain the direction of the bond price, all other things assumed to be constant.
Do you offer home work asistance for MBA finance? If yes how does it work?
ascertain the quality 10 years subsequently of a store of Rs.20,000 made today if the interest rate is (a) 4 percent, (b) 6 percent, (c) 8 percent, and (d) 9 percent.
What will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Realised rate of return.
As manager of short-term projects, you are planning to decide whether or not to invest in a short-term project that pays one cash flow of $1,000 one year from present.
A corporate bond with a face value of $1,000 matures in 4 years and has an 8% coupon rate. The current price of the bond is $1032.
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