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The B & O Railroad is considering a $100,000 investment in either of two companies. The cash flows are as follows:
Year Electric Company Water Works
1 $70,000 $15,000
2 15,000 15,000
3 15,000 70,000
4-10 10,000 10,000
a. Using the payback method, what will the decision be?
b. Explain why the answer in part a can be misleading.
Healthy Foods, Coirporation, sells 50 pound bags of grapes to the military for $10 a bag. The fixed expenses of this operation are $80,000, while the variable costs of grapes are $.10 per pound.
What is the correct name for each of these losses? What is the difference between them? Please give examples of each.
Chester Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. How much will the company pay in separation costs if each worker receives $5,000 when separated?
O'Connell & Co. expects its EBIT to be $95,000 every year forever. The firm can borrow at 8 percent. O'Connell currently has no debt, and its cost of equity is 13 percent and the tax rate is 35 percent. The company borrows $133,000 and uses the pr..
What is the effective rate of interest if the loan is for 1 year and is paid off in one payment at the end of the year? What is the effective rate of interest if the loan is for 1 month?
What is the daily dollar return that could be earned on these savings? (Round your answer to 2 decimal places. (e.g., 32.16))
Each steak dinner sells for $12.40 each. How much would Shula's profit increase if 10 more dinners were sold?
Calculate each projects payback period cutoff. Which would you accept if Puppy's payback period cutoff is 2 years?
Discuss the capital structure of the firm and What conclusions can you draw from this example regarding the use of debt
More of financial management theory is based on assumption that individuals act rationally in their decision making. text has noted several areas where conclusion is that individuals do not act rationally.
Further, you expect that real interest rates will be 3.00 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?
Once the patent expires, other pharmaeutical companies will be able to produce the same drug and competiton will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year?
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