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The Everwood ditch-digging firm has $2,000 of extra cash. George, the CFO, is thinking about what to do with the money. He can put it into treasuries for three years currently yielding 6% or pay it out to shareholders now. Of course, shareholders themselves also have access to the treasury market. Most of the equity investors in Everwood ditch-digging are poor and pay only a 15% personal tax rate. The maximum tax rate on dividends is 18%. The corporate tax rate is 32%. How much money will shareholders have after 3 years under each of George's alternatives and what should he do?
What is the price of a two-year European Call Option with strike price $95, written on MTC stock?
Goods available for sale total $25,000, beginning inventory is $8,000, endings inventory is $12,000, and cost of goods sold is $10,000. How many days is the days-sales-in-inventory?
Sara wants to buy a car. She has negotiated a sales price of $24,185 and she has a $4,000 down payment. She is eligible for the full $750 cash rebate.
What is the present value of an annuity that pays $15,000 at the end of each year for the next ten years if the discount rate is 7.2%? What would be the present value of the same annuity if the payments were made on the first day of each year?
If you start making $205 monthly contributions today and continue them for four years, what is their future value if the compounding rate is 11.50 percent APR? What is the present value of this annuity?
P/E ratio gives us a simple way to conduct equity valuation, but there are still some shortcomings in P/E analysis. What are the potential shortcomings when we use P/E ratio to evaluate equity price? What are the alternative valuation ratios/models t..
There is a firm whose ROE and BVPS are .08 and $9 respectively next year. IF the P/E is 12 times what is the price of the company next year? Explain the pros and cons of the P/E approach.
Calculate and interpret net present value (NPV) method for investment decisions with suitable example.
Stereo Inc. sells a stereo system for $200 down and monthly payments of $60 for the next 4 years. find the total amount of interest paid.
You’ve observed the following "nominal" returns on Crash-n-Burn Computer’s stock over the past five years: 2 percent, -11 percent, 23 percent, 16 percent, and 16 percent. The average inflation rate over this period was 3.4 percent and the average T-b..
What is the firm's after-tax component cost of debt for purposes of calculating the WACC?
You are considering two projects: Project 1 and Project 2. Both projects will return an annuity after an initial investment in the project. You know from your finance course that the present value of an annuity (that is, a payment made every year in ..
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