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Trinkle Foods Limited of Canada has invented a new salt substitute, branded Odessa. Trinkle is deciding whether to spend 6-million Canadian dollars (C$) to test-market a new line of potato chips flavored with Odessa in Vancouver. Depending on the outcome, Trinkle may spend an additional C$50 million 1 year later to launch a full line of snack foods across Canada. If consumer acceptance in Vancouver is high, the company predicts that its full product line will generate net cash inflows of C$13 million per year for 10 years. If consumers respond less favorably, cash inflows from a nationwide launch is expected to be just C$5 million per year for 10 years. Trinkle’s cost of capital equals 15 percent. Should Trinkle spend money to test the market?
Barnes Enterprises has bonds on the market making annual payments, with 16 years to maturity, a par value of $1,000, and a price of $968. At this price, the bonds yield 8 percent. What must the coupon rate be on the bonds?
Your car dealer is willing to lease you a new car for $379 a month for 84 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.8 percent, what is the current value of th..
Find the market ratios (stocks) for Microsoft Company for the last 1-3 years and its major competitor, Apple, Inc. for the last year in the Internet.
If it expects to keep the same payout ratio, and to earn 20% on future investments forever, what will its current price per share be? Assume that the cost of capital is 15%.
Fixed cost sources of financing include both debt and common stock. Financial risk is the basic risk inherent in the operations of a firm. It can be viewed as the volatility of a firm’s EBIT. What is the cost of capital at Marquez’ optimal capital st..
what is your profit or loss on the contract?
Mr. Bill S. Preston, Esq. purchased a new house for $90,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 11 percent compound interest on the unpaid balance..
Winslow Co. has agreed to be acquired by Ferrier, Inc. for $25,000 worth of Ferrier stock. Ferrier currently has 1,500 shares of stock outstanding at a price of $21 a share. Winslow has 1,000 shares outstanding at a price of $22. The incremental valu..
Your firm is contemplating the purchase of a new $749,000 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $45,000 at the end of that time. Working capital will revert ..
A 11-year maturity convertible bond with a face value of $1,000 and a 7% coupon on a company with a bond rating of Aaa is selling for $1,190. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is ..
Maple Industries has 7 percent bonds outstanding that mature in thirteen years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $1,021.16. What is the firm’s pre-tax cost of debt?
Byrd Corp. 10-year bonds are selling at a quote of 98 on the NASDAQ and you just recieved your first interest check for $55.55. What is the stated rate on this bond?
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