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1. If a sale of old equipment results in a loss, the loss is magnified (made larger) by the tax impact of the loss.
a) True
b) False
2. Because the purchase price of old equipment is a sunk cost, the sale of that equipment should have no impact on a capital budgeting analysis.
a)True
3. In order to start a new product line, inventories must be built up. This increase entails a cash outflow that should be included in a capital budgeting analysis.
4. In anticipation of, but prior to, the introduction of a new product line, a feasibility study was contracted and paid for. The cost of this study should be included in a capital budgeting analysis.
Assume the market rate of interest is 6 percent for all maturities of AAA debt. You buy a $1000 face value AAA bond, with a 10% coupon rate, with payments paid semi-annually that matures in 15 years. You hold on to the bond for 6 years and then sell ..
The following regression equation was estimated: Y = -2.0 + 4.6X.
A7X Corp. just paid a dividend of $2.70 per share. The dividends are expected to grow at 19 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the price of the..
FARO Technologies, whose products include protable 3D measurement equipment, recently had 17 million shares outstanding trading at $42 a share. Suppose the company announces its intention to raise $200 million by selling new shares. What percentage o..
Assume that the log price pt = ln(Pt) follows a stochastic differential equation. - where wt is a Wiener process. Derive the stochastic equation for the price Pt.
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BBC has an average accounts payable balance of $500,000. Its average daily cost of goods sold is $15,000, and it receives terms of 2/15, net 35, from its suppliers. BBC chooses to forgo the discount. Is the firm managing its accounts payable well?
Draw the long- run aggregate supply curves for successive long- run equilibriums with a potential growth rate of real GDP at 2.5 to 3.0 percent per year.
Fred and Sarajane exchanged equipment in a qualifying-like-kind exchange, Fred gives up equipment with an adjusted basis of $14,000 (fair market value of $15,000)in exchange for Sarajane's equipment with a fair market value of $12,000 plus $3,000 cas..
Consider a firm that pays no dividends. Next year’s earnings are projected to be $1,500,000. The present value of growth opportunities is estimated to be $13,500,000. Suppose that there are 250,000 shares outstanding. If investors require a return of..
The bank also requires you to pay a 3 percent loan origination fee, which will reduce the effective amount the bank lends to you. Compute the annual percentage rate of interest on this loan.
Write a paper about the case study Strategic Financial Planning in Long-Term Care.
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