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Consider a capital project whose initial cost, which is all capital, cost is $200million. The project's anticipated economic life is 8 years. At the end of each of these 8 years the project is expected to produce an incremental revenue of $10million and 40% of the incremental revenue will be the incremental costs, other than the capital cost allowance, CCA. The CCA will be claimed on a declining balance basis at the d rate of 30%. The first year one-half will apply. The corporate tax rate o the firm is 40%. The salvage value f the equipment at the end of year 8 id $6.0million. The project's capital cost is 12% per annum. Finally the project will require the incremental net working capital of $1.5 million now and at the end of the first year, and thereafter incremental net working capital requirements will be zero. Evaluate the project.
Explain, with examples, the key factors to be considered when formulating a working capital funding policy?
Ming as a plumber; Juliana as a welder, making the same salary. How long will it take Ming to pay off his credit card?
Calculate the after-tax dividend income of shareholders assuming they face a marginal tax rate of 49%. Show all working.
The firm has two divisions, divisions A and B, each with the same level of risk. The firm’s after-tax cost of capital is 16%. The firm’s EBIT was $900,000 last year. The B division had an EBIT of $300,000. The tax rate is 30%. What was the A division..
Find the weighted average cost of capital.
A new start-up company promises to pay an investor each quarter for the next two years. what is the value of the investment opportunity today?
Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 3 years ago. What is the pretax cost of debt? What is the aftertax cost of debt?
Distinguish between beta (i.e market) risk, within-firm ( i.e, corporate) risk, and stand-alone risk for a potential project. Of the three measures, which is theoretically the most relevant, and why? Suppose a firm estimates its overall cost of capit..
Behemoth had an outstanding benefits plan and he was eligible to participate in the company's 401(k) in June of 2001
Laurensmani SpA's financial year is to 31 December.- Analyse given transactions using the accounting equation on the hypothesis that the difference paid in cash was.
Calculate duration and modified duration for the bond. What is the size and direction of the pricing error in duration-predicted price you calculated in part
Let’s try to examine the most glaring issue with IRR via an example. Let’s suppose a friend of yours offers you an "investment."
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