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Effect of capital structure on companies value per share.
After-tax cash flows: payback NPV; PI; IRR Fabulous Fashions is considering the purchase of computerized clothes designing software. The software is expected to cost$160,000, have a useful life of five years, and have zero salvage value at the end of its useful life. Assume tax regulations permit the following depreciation patterns for this asset:
Year
Percent Deductible
1
20
2
32
3
19
4
15
5
14
The company's tax rate is 30 percent and its cost of capital is 8 percent. The software is expected to generate cash savings and cash expenses:
Cash Savings
Cash Expenses
$61,000
$9,000
67,000
8,000
72,000
13,000
60,000
9,000
48,000
5,000
a. Prepare a time line presenting the after-tax operating cash flows b. Determine the following on an after-tax basis; payback period, net present value, profitability index and internal rate of return.
What is the profitability index of the project and the constant-growth rate for dividends must be equal to the required rate of return.
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compute the expected return of portfolio on the facts narrated.a stock has a beta of 0.8 and an expected return of 13
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The beta of Microsoft stock is 1.2, where risk free rate of return is 4%. Suppose that the expected return on the market is 16%.
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The given ventures are at different stages in their life cycles. Identify the likely stage for every venture & explain type of financing every venture is likely to be seeking and identify potential sources for that financing.
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