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1.WorldCom reclassified $3.85 billion of operating expenses as capital expenditures. Explain the effect this reclassification would have on WorldCom’s cash flows. (Hint: Consider taxes.) WorldCom’s actions were illegal and clearly designed to deceive investors. But if a firm could legitimately choose how to classify an expense for tax purposes, which choice is truly better for the firm’s investors?
2.Honda Motor Company is considering offering a $2000 rebate on its minivan, lowering the vehicle’s price from $30,000 to $28,000. The marketing group estimates that this rebate will increase sales over the next year from 40,000 to 55,000 vehicles. Suppose Honda’s profit margin with the rebate is $6000 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea?
3.You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2 million Czech koruna today in exchange for a year’s supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 3 million Thai baht today. If the current competitive market exchange rates are 25.50 koruna per dollar and 41.25 baht per dollar, what is the value of this deal?
4.Suppose the current market price of corn is $3.75 per bushel. Your firm has a technology that can convert 1 bushel of corn to 3 gallons of ethanol. If the cost of conversion is $1.60 per bushel,at what market price of ethanol does conversion become attractive?
You are considering purchasing an existing single family house for $200,000 with a 20 percent downpayment and a thirty-year fixed-rate mortgage at 5.5 percent.
ABC corporation has operating income of $25,566. The company's depreciation expense is $9,856. The company is all equity-financed and it faces a tax rate of 36%. What is the company's net cash flow?
a generous university benefactor has agreed to donate a large amount of money for student scholarships. the money can
Determine the implied growth duration of Kayleigh Industries given following:
Bob's baked goods company reported, the following income statement for 2009, with an increase of 20% what would the EPS be?
The Hughes firm is involved in a competitive bidding situation. Variable costs related to the project total $290,000. and allocated fixed overhead is $95,000.
1. which of the following statements is correct?a. some of the cash flows shown on a time line can be in the form of
if you deposit 2500 in a bank account that earns 8 annually on a continuously compounded basis what will be the
Discuss how securities backed by title loans differ from securities backed by cash-flow generating assets in terms of risk and liquidity. How do high-yield bonds affect each type of security?
challenge problem consider a market with only the following three risky assetsexpected return per month risk
Sybex Corp. sells its goods with terms of 1/14 EOM, net 36. What is the implicit cost of the trade credit?
Discuss the capital structure of the firm and What conclusions can you draw from this example regarding the use of debt
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