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Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for six years. The accounting department estimates that annual fixed costs will be $600,000 and that variable costs should be $250 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the six-year project life. It also estimates a salvage value of $450,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $340 per ton. The engineering department estimates you will need an initial net working capital investment of $560,000. You require a return of 14 percent and face a marginal tax rate of 30 percent on this project.
a. What is the estimated OCF for this project?
Nedo Enterprises originally sold bonds in 2011 with a 10 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate. What price would bond investors be..
Suppose that you own a callable U. S. agency bond like that in Exhibit 16.9. Explain why your total return will fall when interest rates rise. Identify changes in return associated with each component of total return. Why will total return rise when ..
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Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15%. The market risk premium is currently 5%. If the inflation premium increases by 2%, and Oakdale acquires new assets that increase its beta by 50%, what will be ..
Sometimes the management of a target firm fights a takeover attempt even when that attempt appears to be in the best interest of the shareholders. Why would management take this stance? What tools would management use to mount such a defense?
What rate should you charge for these services (assuming one charge rate for all payers)? (This gives you your total A/R.) Calculate the total charges for all cases based on this rate.
Using center of-gravity model, compute the center of gravity for the population of the county. Show all of your computations, explain, and justify. Based soley on this criterion, where is the best stadium location? Research and explain at least three..
One of your employees comes to you, the benefits manager, and expresses her desire to withdraw a substantial portion of the vested funds she has accumulated in the qualified defined contribution plan that your company offers. What questions will you ..
Crosby Industries has a debt-equity ratio of 1.2. Its WACC is 14 percent, and its cost of debt is 5 percent. There is no corporate tax. What is Crosby’s cost of equity capital? What would the cost of equity be if the debt-equity ratio were 2?
Jaguar, Inc. maintains a debt-equity ratio of .60 and follows a residual dividend policy. The company has after-tax earnings of $3,100 for the year and needs $3,000 for new investments. What is the total amount Jaguar will pay out in dividends for th..
The constant-growth dividend discount model (DDM) can be used only when the ___________.
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