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Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .63. It’s considering building a new $65.3 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7.78 million in perpetuity. There are three financing options:
A new issue of common stock: The required return on the company’s new equity is 15.3 percent.
A new issue of 20-year bonds: If the company issues these new bonds at an annual coupon rate of 7.3 percent, they will sell at par.
Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .12. (Assume there is no difference between the pretax and aftertax accounts payable cost.)
If the tax rate is 38 percent, what is the NPV of the new plant?
The difference between EBIT and taxable income must be the interest expense.
You purchase a 3D printer for $75,000 that you expect to print 8,000 parts over its lifetime. You print 1,500 parts your first year. Assume no salvage value for the printer. What is your allowable depreciation for the first year using the Units of Pr..
What is your two-week interest charge expressed as a percentage of the loan received?
You invest in portfolio and always reinvest any dividends and interest earned. Which of the following provides best measure of performance of that portfolio.
Calculate the expected return over the 4-year period for each of the three alternatives.
According to the conceptual framework for financial reporting, ensuring that information represents what it purports to represent is termed
Northman’s common equity, debt, and preferred equity are worth $70,000, $10,000 and $20,000 respectively with a total value is $100,000. The company’s common stock is currently listed at $54 per share; new preferred stock sells for $70 per share with..
You were hired as a consultant to XYZ Company, whose target capital structure is 29% debt, 11% preferred, and 60% common equity. The interest rate on new debt is 6.80%, the yield on the preferred is 5.75%, the cost of common from retained earnings is..
Prepare your performance report to show calculations for the eleven ratios listed on page 131-132, as well as a comparison of your computed ratios with the listed industry averages.
Consider the following series of cash flows: Payback will be smaller than discounted payback
What EAR (effective annual rate) is the bank is charging? What if they change compounding to bi-monthly?
A company is offering you terms for payment on an invoice of $15,000 of "Discount 5% in 10 days Net 60 days." This means that you can either pay 95% of the amount due in 10 days or pay the entire amount in 60 days. What is the effective rate per year..
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