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Opportunity Cost Approach
A. If the defender can be sold for $80,000 today but you decide to keep the defender, what is the proper treatment of the $80,000 using the opportunity cost approach?
B. Explain how Opportunity cost is used when evaluating projects using the opportunity cost method and how it is used for the cash-flow method.
The following Income Statement and Balance Sheet is for Damian's and Weston's Company: $K 2015 2014 Sales 60 20 Operating Costs 25 8 Depreciation 4 2 EBIT 31 10 Less Interest 0.5 0.5 Earnings before Taxes 30.5 9.5 Taxes @ 40% 12.2 3.8. What are the a..
On January 1, 2015, Lyle's Limeade issues 5%, 15-year bonds with a face amount of $85,000 for $76,670, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded in the December 31, 2015, annual income stateme..
Some fast food restaurants have lease agreements where their rental payment is a nominal amount plus a percentage of sales, rather than a fixed monthly amount. Discuss the effect of these lease agreements on the leverage and risk of the company.
Union Local School District has bonds outstanding with a coupon rate of 3.5 percent paid semiannually and 13 years to maturity. The yield to maturity on these bonds is 2.5 percent and the bonds have a par value of $10,000
You discussed corporate governance in the Discussion. Now you will apply what you learned to analyze the corporate culture and its influence on potential fraud. Read about corporate governance at Diamond Foods, in the Harvard Business Case study link..
Find a call option and put option for a publicly traded company that have the same expiration date and exercise price. Calculate the price of the call and put options using the Black-Sholes pricing model. Assume r = 1% and σ = .20
The gamma and vega of a delta-neutral portfolio are 75 per $ and 15 per %, respectively. What will happen to the value of the portfolio when there is a shock to the market causing the underlying asset price to decrease by $4 and its volatility to inc..
Assume you have a one-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. What is your rate of return on ea..
Research and write an essay on what must be done to improve ethics in finance and corporate governance. Your paper should be 4–6 pages in length, and include three outside references.
Firm X’s stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60. Show your work.
You are finalizing a bank loan for $200,000 for your small business and the closing fees payable to the bank are 2% of the loan. After paying the fees, what will be the net amount of funds from the loan available to your business?
The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $950 that carries a coupon interest rate of 13.6 percent that ..
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