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Two firms, Alpha, Inc., and Beta, Inc., are in the same business. Alpha, Inc., has debt that is viewed by the market as risk-less with a market value of $500 million. Beta, Inc., has no debt. Both firms are expected to generate cash flows of $100 million per year for the foreseeable future and the market value of the equity of Beta, Inc is $1000 million. Estimate the percentage return on equity of Alpha, Inc. Assume there are no taxes, and the risk-free rate is 5.00%. (Allow two decimals in the percentage but do not enter the % sign.)
Suppose that a treasury manager desire to move $10,000,000 from a regional bank account to the firm’s centralized bank account.
The construction of a new runway at an airport will cost $30 million, to be paid with capital development bonds over a 20-year period. The runway is expected to decrease the average aircraft delay from 9 to 5 min. The average annual demand is expecte..
The cost of both depth equity and capital rise as a firm increases its reliance on one or the other. Suppose that a for-profit company has identified the following costs for debt and equity: What is the optimal capital structure for this firm?
Incorporating these new values, and the real option, what is the new NPV of the project?
Calculate the present value of an annuity that makes annual payments of $1,000,000 every year for 9 years, with the next payment being made exactly one year from now.
Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called.
Analyse and research into the descriptive nature of financial instruments categorization,
A friend announces a plan to benchmark the performance of his small-cap stocks with the S&P 500. Which of the following concerns should dominate your thoughts?
Find the price of an American call option on this stock that expires in 4 months at $40 strike.
You are considering the purchase of an investment that would pay you $5,000 per year for Years 1-5, how much should you be willing to pay for this investment?
You have just purchased a new warehouse. To finance the purchase, you arranged for a 30-year mortgage loan for 65 percent of the $2.5 million purchase price. The monthly payment on this loan will be $10,400. What is the effective annual rate on this ..
If a municipal bond has a coupon of 4.1%, and a corporate bond had a coupon of 7.3%, what tax bracket would you need to be for it to make sense to invest in the municipal bond?
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