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Neon Corporation’s stock returns have a covariance with the market portfolio of .0365. The standard deviation of the returns on the market portfolio is 25 percent, and the expected market risk premium is 9 percent. The company has bonds outstanding with a total market value of $55.15 million and a yield to maturity of 8 percent. The company also has 4.65 million shares of common stock outstanding, each selling for $30. The company’s CEO considers the current debt–equity ratio optimal. The corporate tax rate is 34 percent, and Treasury bills currently yield 4.9 percent. The company is considering the purchase of additional equipment that would cost $42.15 million. The expected unlevered cash flows from the equipment are $11.95 million per year for five years. Purchasing the equipment will not change the risk level of the company.
Calculate the NPV of the project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
An asset’s reward-to-risk ratio is defined as its risk premium divided by its standard deviation. Calculate the total risk of this portfolio.
what coupon rate will be demanded by the bondholders for the bonds to sell at par?
The market price for your stock is now $101.67. What is your total return for last year?
Beaksley, Inc. is a very cyclical type of business which is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year with a payment being paid today. Five years from now, the company is repurchasing all of the outstan..
Calculate the inventor’s margin account at the end of the each of the four days.
what is the aftertax cash flow from the sale of this asset?
WACC The Patrick's Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debit is 13%, and it marginal tax rate is 40%. Assume that the firms long term debt sells at par value. The firm has 576 shar..
Assume that Famous Danish is in the 34% income tax bracket. How much net cash will Famous Danish receive from the sale?
An investor purchased 350 shares of a company at $40 per share. What was the rate of return on this investment for the one-month period?
J Manufacturing signed an agreement on January 1, 2015 to lease a Machine to ABC Company. The following information relates to this agreement. The asset will not revert back to the lessor at the end of the lease at which time the asset is expected to..
The common stock of the C.A.L.L Corporation has been trading in a narrow range around $50 per share for the past month, and you believe it is going to stay in that range for the next three month. What is the most money you can make on this option? Ho..
A company is using the Profitability Index (PI) when evaluating projects. You have to find the PI for the company's project, assuming the company's cost of capital is 9.5%. The initial outlay for the project is $379,000. The project will produce the ..
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