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1. Why is WACC a reasonable discount rate to use when estimating the NPV of a project using free cash flows to the firm?
Given following information, what is the companys ROE?
Debt 5: 60%
Tax Rate: 35%
Earnings before interest and tax: $20,000
Interest Rate: 8%
Assets: $160,000
A. 12.098%
B. 12.153%
C. 13.116%
D. 13.867%
2. Provide 2 comments on the following statement: the reason we are seeing fewer market creating innovations is because using NPV and IRR to make capital budgeting decisions will result in only accepting projects with short payoff periods.
You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $300 a month in a bond account. The return of the stock account is expected to be 11% APR compounded monthly, and the bond..
A put option has a delta of -0.3. A trader has bought 1000 options and wants to create a delta-neutral position.
An engineer is working on the layout of a new research and experimentation facility. what is the after-tax payback period?
Search the internet to find the monthly stock price in 2015 for the S&P 500, Wal-Mart and Target. Put a table together with information and also state your source of information (URL used). Then calculate the average monthly holding-period returns an..
The fact that a proposed project is analyzed based on the project's incremental cash flows is assumption behind which principle?
The law firm of Dewey, Cheatem, and Howe has monthly fixed costs of $100,000, EBIT of $250,000, and depreciation charges on its office furniture and computers.
Interpret each value.b. Assume now that the bank loan would cost 15 percent, but all other facts remain the same. What is the new NAL? The new IRR?
What is the incremental revenue associated with the discount product line?
If you expect economic conditions will strengthen and government spending will increase.
Calculate the NPV and IRR of the project and make a decision.
Home loans typically involve “points,” which are fees charged by the lender. Each point charged means that the borrower must pay 1% of the loan amount as a fee. Assume the interest rate is .75% per month. What is the effective annual interest rate ch..
A project has the following cash flows: Year Cash Flow 0 $ 74,000 1 – 56,000 2 – 26,800 Requirement 1: What is the IRR for this project? What is the NPV of this project if the required return is 6 percent? What is the NPV of the project if the requir..
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