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A firm is considering a project that will generate perpetual after-tax cash flows of $18,000 per year beginning next year. The project has the same risk as the firm’s overall operations and must be financed externally. Equity flotation costs 15 percent and debt issues cost 6 percent on an after-tax basis. The firm’s D/E ratio is 0.7.
What is the most the firm can pay for the project and still earn its required return? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
Maximum the firm can pay $
A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. What is the yield to maturity on this bond?
Tool Makers, Inc. uses tool and die machines to produce equipment for other firms. The initial cost of one customized tool and die machine is $850,000. This machine costs $10,000 a year (after-tax) to operate. Each machine has a life of 3 years befor..
Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns?
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At an output level of 48,000 units, you calculate that the degree of operating leverage is 1.40. If output rises to 60,960 units, what will the percentage change in operating cash flow be? (Do not round your intermediate calculations.)
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Describe a hypothetical, community bank with approximately 30 employees. The bank has only one location—a 2,800 square foot building located downtown housing their 30 employees. Describe the relevant characteristics of this small bank in depth.
Bowman, Inc., is proposing a rights offering. Presently there are 600,000 shares outstanding at $47 each. There will be 120,000 new shares offered at $38 each. What is the new market value of the company? How many rights are associated with one of th..
For SKU A3510 at the Hardware Warehouse, the order quantity has been set at 150 units each time an order is placed. The daily demand is normally distributed, with a mean of 12 units and a standard deviation of 4. It always takes exactly 5 days for an..
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