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In Excel, Och Inc is considering a project that will result in initial aftertax cash savings of $3.5 million at the end of the first year, and these savings will grow at a rate of 4% per year indefinitely. The firm has a target debt equity ratio of .55, a cost of equity of 13%, and an aftertax cost of debt of 5.5%. The cost saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustent factor of +2% to the cost of capital for such risky projects. Under what circumstances should Och take on the project.
Beta Electronics is considering the purchase of testing equipment that will cost $828,000 to replace old equipment. Assume the new equipment will generate before-tax savings of $415,000 over the four years. The new equipment will result in additonal ..
Create synthetic positions using any options of your chice. Discuss why an options trader would create these synthetic positions using options, and include the advantages and disadvantages of the trades. Also include a discussion on whether this synt..
Is there a relationship between the inflation rate and M3? What does the quantity theory of money discussed in Chapter 2 say the relationship should be?
You purchase a Treasury-bond futures contract with an initial margin requirement of 30% and a futures price of $123,900. The contract is traded on a $100,000 underlying par value bond. If the futures price falls to $107,200, what will be the percenta..
Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of .7 and an expected return of 8.6 percent. If the risk-free rate is 5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y an..
Bob's Bank has offered you a $40,000 mortgage on a house. Payments are to be $374.90 per monht for 30 years. Please include equations used to solve this problem. What effective monthly interest rate is Bob charging? What is the APR on this loan? What..
Calculate the Holding Period Return: You invested to one of investment $45 per year last year. This year is worth $54 per share. Company also pays dividend $15 per share. What is the total return over the past year.
McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1110000 on research and development for the new clubs. The plant and equipment required will cost $28560948 and will be depre..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.86 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..
Which of the following statements about the income statement is most correct?
How does the size of the change in a bond's price react in response to a given change in the yield to maturity as the time to maturity increases? Which one of the following statements is correct concerning Macaulay duration? A bond has a face value o..
A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond?
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