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1. Assume a firm has earnings before depreciation and taxes of $640,000 and no depreciation. It is in a 35 percent tax bracket.
1. Compute its cash flow
2. Assume it has $640,000 in depreciation. Recompute its cash flow.
3. How large a cash flow benefit did the depreciation provide?
2. Matis corporation invest 1,500,00 South African rand as a nominal interest rate of 10 perent. At the tmime the investment is made, the spot rate of the rand is USD 0.205. If the spot rate of the rand at maturity of the investment is USD 0.203, what is the effective yield of investing in rand?
A. 11.08 percent
B. 8.92 percent
C. 10.00 percent
D. 12.50 percent
E. none of the above
Winnebagel Corp. currently sells 20,000 motor homes per year at $58,000 each, and 7,000 luxury motor coaches per year at $95,000 each. The company wants to introduce a new portable camper to fill out its product line; What is the amount to use as the..
You must evaluate a proposed spectrometer for the R&D department. The base price is $230,000, and it would cost another $46,000 to modify the equipment for special use by the firm. What is the initial investment outlay for the spectrometer, that is, ..
The treasurer of a large corporation wants to invest $33 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 4.21 percent; what are the bond equivalent and discount yields..
Mega Magazine, Inc. collects all subscription revenue in advance. Mega Magazine report on its income statement for the year ended December 31, 2010?
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Last year you sold short 400 shares of stock selling at ?$73.96 per share. Six months later the stock had fallen to ?$32.33 per share. Over the? six-month period the company paid out two dividends of ?$2.06 per share. Your total commission cost for s..
Calculate the expected return for Johnson & Johnson.- Find the highest expected return that is offered by one of the above stock.
Gemini, Inc., an all-equity firm, is considering an investment of $1.8 million that will be depreciated according to the straight-line method over its four-year life. The project is expected to generate earnings before taxes and depreciation of $605,..
If the interest rate on the loan is 8% what final payment will the bank require you to make so that it is indifferent to the two forms of payment?
Explain the term 'zero sum game' in a derivative transaction. Discuss the main difference between Treynor's position of investment risk measurement and that of Sharpe and use your answer to deduce the equation of the CAPM in each.
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will red..
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