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MyWorld, Inc. is an all-equity firm whose current business involves manufacturing and selling software. The company is blessed in that it operates in capital markets that are perfect, that is, there are no taxes or bankruptcy costs. The current weighted average cost of capital (WACC) of MyWorld, Inc. is 8.50%, and its equity beta is 0.90. MyWorld, Inc. is considering penetrating the wine industry, and would like its total value to consist of 70% software and 30% wine. The wine project requires a $800,000 investment at t = 0 and will yield $150,000 a year for the following 40 years, starting a year from today (at t = 1). The manager of the new project has found that the average return on equity is 20%, and the average debt-to-equity ratio is 1.00, in the wine industry. All the debt in this industry is viewed as default free by the market. The risk free rate is 4%, the market risk premium (the average difference between the return on the market and the risk-free rate) is 5%, and the wine project will be financed with $600,000 of debt. What is the NPV of this project?
a. Calculate John's insurance need using the capital retention approach, an after-tax discount rate of 5.5%, and assume end-of period payment of benefits. b. Calculate John's insurance need using the human life value approach (HLV), an after-tax disc..
Avicorp has a $14.2 million debt outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94% of par value.
The marginal tax rate for the firm is 30%. How much long-term debt does the firm have?
Benkart's Tire Store has fixed costs of $220,000. Tires sell for $95 each and have a unit variable cost of $45. What is Benkart's break-even point in units.
The market portfolio is assumed to be composed of two securities, Investment X and Investment Y as given below. Determine based on the information given the average return,
microsoft is considering changing its capital structure in light of the tough business environment.currently msftrsquos
Calculate the optimal money growth rate needed for the Fed to hit its inflation target in the long run.
develop and describe a strategic measurement scorecard that might be incorporated with the financial measures applied
What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?
The Florida lottery agrees to pay the winner $244,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.09?
First January 2006, Maple Leaf Company reported the following property, plant, equipments. Compute amount of amortization expense for 2006 in respect of each asset given above under straight line method.
Use the following information for the next four questions. Norlin Corporation is considering an expansion project that will begin next year (Time 0). Norlin's cost of capital is 12%. The initial cost of the project will be $250,000.
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