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You are a research scientist with a new drug idea. Only you can know how good it is. It costs $100 million to create a lab and test it. If it pans out you get $500 million. If it does not you can resell the lab for the same amount you paid. You do not have $100 million in cash. The discount rate is 0%.
a. What is the expected NPV if there is a 50% chance of the drug succeeding?
b. If you know up front the drug works would you choose to issue debt or equity?
c. What about if you knew it wouldn't work?
Preparing a Balance Sheet. Prepare a balance sheet for Alaskan Strawberry Corp. as of December 31, 2016, based on the following information: cash = $197,000; patents and copyrights = $863,000; accounts payable = $288,000; accounts receivable = $265,0..
Eddy purchased a club membership costing $2,530. He made a down payment of $530 and financed the balance with an installment loan for 48 months. If the payments are $59.27 each month, use Table 13-1 from your text to find the APR.
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What happens to the demand for real balances if interest rates on time deposits rise relative to interest rates on checkable deposits?
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Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
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The payback period rule states that you should accept a project if the payback period is less than one year. The payback period considers the timing and amount of all of a project's cash flows. You are analyzing a short-term project with conventional..
How do I figure out cost allocation on a piece of land if the original cost was 250,000, market value is 300,000, net book value is 250,000, and offer to purchase is 300,000?
Fresher Foods, Inc., orally agreed to purchase one thousand bushels of corn for $1.25 per bushel from Dale Vernon, a farmer. Fresher Foods paid $125 down and agreed to pay the remainder of the purchase price on delivery, which was scheduled for one w..
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