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Shao Industries is considering a proposed project for its capital budget. The company estimates that the project"s NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company"s CFO, however, forecasts that there is only a 50 percent chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis:
Economic Scenario Probability of Outcome NPV
Recession 0.05 ($70 million)
Below average 0.20 (25 million)
Average 0.50 12 million
Above average 0.20 20 million
Boom 0.05 30 million
What is the project"s expected NPV, its standard deviation, and its coefficient of variation?
when companies accumulate costs they generally use either a job-order or a process costing system. the type of system
All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the new equipment that will be purchased today (year 0), which is what the accounting department recommended. The report concludes that..
The firm's legal fees, SEC registration fees, and other out-of-pocket costs were $473,500. The firm's stock price increased 17.5 percent on the first day. What was the total cost to the firm of issuing the securities?
What is a project finance (PF) loan? What role does a stand-alone company play in the typical project finance deal?
D. Butler Inc. needs to raise $14 million. Assuming that the market price of the firm's stock is $95, and flotation costs are 10 percent of the market price, how many shares would have to be issued? What is the dollar size of the issue?
Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.
Calculate the present value of $1,000 to be received ten years from now if the required real rate of return is 3 percent compounded yearly and the expected rate of inflation is 5 percent compounded yearly?
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Discuss the positives and negatives of CAPITALIZING leases and the related leased assets.
A kilowatt-hour is 1,000 watts for 1 hour. If you require a 9 percent return and use a light fixture 500 hours per year, what is the equivalent annual cost of each light bulb?
Calvin opened his dental practice (a sole proprietorship) in May 2010. At the end of the year, he has unpaid accounts receivable of $36,000 and no unpaid accounts payable. Should Calvin use the accrual method or the cash method for his dental prac..
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