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Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time: 0 1 2 3 Project A Cash Flow -37,000 27,000 47,000 18,000 Project B Cash Flow -47,000 27,000 3,000 67,000 Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected? Please clearly show all steps either written out step by step or in a chart that is clearly understood.
Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real va..
General Mills (NYSE: GIS) is a large manufacturer and distributor of package consumer food products. Benoit Gagnon, a buy-side analyst covering General Mills, has studied the historical growth rates in sales, earnings, and dividends for GIS, and also..
Eagle Products’ EBIT is $400, its tax rate is 30%, depreciation is $16, capital expenditures are $56, and the planned increase in net working capital is $25. What is the free cash flow to the firm?
On April 12, Sally accepted a $40,000, 8%, 180 day note from Mary Jones. On July 19, Sally sold the note to Acme Investments at a discount rate of 9%. How much does Mary Jones repay at the end of 180 days? Whom does Mary Jones repay? How much does Sa..
In the third column, calculate the difference by subtracting 2008 data from 2009 data. For instance, with cash, this would be $22,995 - $41,851 = -$18,856. In the fourth column, calculate the percentage change from the 2008 number. For instance, with..
Your firm has an average collection period of 22 days. Current practice is to factor all receivables immediately at a discount of 1.2 percent. What is the effective cost of borrowing in this case? (Do not round intermediate calculations. Enter your a..
The rate of inflation for the next 12 months (Year 1) is expected to be 1.4 percent; it is expected to be 1.8 percent the following year (Year 2); and it is expected to be 2.0 percent every year after Year 2. Assume the real risk-free rate, r*, is 3 ..
Nu-Platinum is a highly successful mining company. The company just paid a dividend on the stock of $0.60. Business has been growing well over the past few years and is expected to do so at 25% for the next 3 years. If the required return is 20% what..
What is the fundamental weakness of the GAP ratio as compared with GAP as a measure of interest rate risk?
The Lopez-Portillo Company has $11.9 million in assets, 70 percent financed by debt, and 30 percent financed by common stock. The interest rate on the debt is 13 percent and the par value of the stock is $10 per share. What is the degree of financial..
Management wants to avoid the expense of hiring and training agents to sell the new policy and wants to sell the insurance directly to the public by selective advertising in personal finance magazines.
Stilley Corporation had earnings after taxes of $436,000 in 2013 with 200,000 shares outstanding. The stock price was $42.00. In 2014, earnings after taxes declined to $206,000 with the same 200,000 shares outstanding. The stock prices declined to $2..
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