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In the early 1990s, the California Air Resources Board (CARB) started planning its “Phase 2” requirements for reformulated gasoline (RFG). RFG is gasoline blended to tight specifications designed to reduce pollution from motor vehicles. CARB consulted with refiners, environmentalists, and other interested parties to design these specifications. As the outline for the Phase 2 requirements emerged, refiners realized that substantial capital investments would be required to upgrade California refineries.
Assume a refiner is contemplating an investment of $400 million to upgrade its Californian plant. The investment lasts for 25 years and does not change raw-material and operating costs. The real (inflation-adjusted) cost of capital is 7%. Ignore taxes.
How much extra revenue would be needed each year to recover that cost? (Do not round intermediate calculations. Enter your answer in dollars, not millions, rounded to the nearest whole number.)
Annuity payment $
If debt financing is used, The percentage change in net operating income is greater than a given percentage change in net income. The percentage change in net operating income is equal to a given percentage change in net income. The percentage change..
The coupon rate on an issue of debt is 11%. The yield to maturity on this issue is 10%. The corporate tax rate is 37%. What would be the approximate after-tax cost of debt for a new issue of bonds?
Vitronix Corporation's net worth exceeds $160 million, its stock is publicly traded, and a national CPA firm audits its financial statements. Wilson Corporation's net worth also exceeds $160 million. However, it is closely held by members of the Wils..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon r..
A company has earnings before interest and taxes of $671,551, a tax rate of 34%, What is the company’s operating cash flow?
Student Pleasers, Inc. issues $5 million (face value) in commercial paper, at a discount yield of 7.8%. The maturity is 270 days. Compute the price paid by investors for the paper. (solve to the nearest dollar). After computing the price, compute the..
If Kose’s cost of equity is 15 percent, what is its pretax cost of debt? what is the cost of equity?
An investor purchases a stock for $65 and writes a call option on the same stock with an exercise price of $70 for a premium of $4 per share. The call option expires in one year. What is the maximum profit the investor can earn on the combined "cover..
Can private-sector financial management techniques be applied readily to running a school system?
Giving the purchaser the right to sell the underlying security at a prespecified price is. Capital structure refers to:
Calculate the cost of fuel of a conventional (non-solar) energy system for 12 years, if the total annual load is 152 GJ and the fuel price is $14/GJ, the market discount rate is 8%, and the fuel inflation rate is 5% per year.
Over the past 5 years, NBA’s common stock earnings per share have grown from $0.62 to $0.91. If an investor in NBA stock is assumed to have a required rate of return of 14%, what is the estimated value of NBA if its current dividend is $0.12? Assume ..
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