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Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .75. It’s considering building a new $54 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.6 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 8.4 percent of the amount raised. The required return on the company’s new equity is 15 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 3 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 6 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .10. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 38 percent tax rate.
We have the following current spot ex-rates: A. $1.0842 / € B. ¥123.2253 / $ C. $1.5028 / £ D. BRL 3.6720 / $ (Brazilian real) a. Assume that the dollar is expected to steadily depreciate at a rate of 6% over the next year. Calculate and report the 3..
Consider the following financial statement information for the Ayala Corporation: Item Beginning Ending Inventory $ 10,300 $ 11,300 Accounts receivable 5,300 5,600 Accounts payable 7,500 7,900 Credit sales $ 83,000 Cost of goods sold 63,000 Calculate..
CAR Inc. will be liquidated in one year. The value of CAR’s assets is currently $650 million, and next year it will be either $825 million or $400 million. Before shareholders can be paid next year, CAR will have to repay $500 million of debt. What i..
The risk-free rate of return is 8 percent, the required rate of return on the market, E[Rm] is 12 percent, and Stock X has a beta coefficient of 1.4. If the dividend expected during the coming year, D1, is $2.50 and g = 5%, at what price should Stock..
Project K costs $62,307.93, its expected cash inflows are $14,000 per year for 9 years, and its WACC is 11%. What is the project's IRR?
a.what is a ventures present value? does the past matter? what is meant by the statement if you are not using
The present value of an annuity of $8,000 per year for 25 years at 5% interest is: The future value of an annuity due of $10,000 per year for 20 years at 5% interest is: The most important components of any contract include the following EXCEPT
On Sept. 9, 2015, the Justice Department announced it will “will try harder to hold company executives responsible for corporate crimes.” The Justice Department had followed a policy of prosecuting companies - instead of individuals within a company...
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $6,300,000, and it would be depreciated straight-line to zero ove..
During times of inflation, which of these inventory accounting methods is best for cash flow? LIFO, because the most expensive goods are recorded as being sold first, resulting in a higher cost of goods sold and a lower reported net income.
An investor holds a porfolio of stocks and is consider in investing in the DBB Company. The firm's prospects look neutral and you estimate the following probability distribution of possible returns. How much is the coefficient of variation for the ne..
River Walk Tours is expected to have an EBIT of $354,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $24,000, $2,000, and $33,000, respectively. What is the terminal value of the firm’s cash f..
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