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Triad Corporation has established a joint venture with Tobacco Road Construction, Inc., to build a toll road in North Carolina. The initial investment in paving equipment is $81.4 million. The equipment will be fully depreciated using the straight-line method over its economic life of five years. Earnings before interest, taxes, and depreciation collected from the toll road are projected to be $13.5 million per annum for 20 years starting from the end of the first year. The corporate tax rate is 34 percent. The required rate of return for the project under all-equity financing is 14 percent. The pretax cost of debt for the joint partnership is 9.9 percent. To encourage investment in the country’s infrastructure, the U.S. government will subsidize the project with a $26.4 million, 15-year loan at an interest rate of 6.4 percent per year. All principal will be repaid in one balloon payment at the end of Year 15. What is the adjusted present value of this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
It is time for you to finalize your findings for your boss. He is expecting your analysis of your division's operations and to produce a plan to improve operations with an eye for reducing costs.
What is the relationship between the price of the bond and it YTM?
Your firm is contemplating the purchase of a new $555,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $55,000 at the end of that time. You will save $285,000 before..
The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, and 3-year securities yield 6.3%, and 4-year securities yield 6.5%.There is no maturity risk premium. Using expectations theory, forecast the yields on the following securit..
A piece of equipment costs $1200 and has a salvage value of $400 at the end of its 3 year life. Maintenance costs are $200 for the first year and increase $50 per year to the end of it's 3 year useful life. The company has an MARR of 6%. What is the ..
Determine the required rate of return for New Castle's common stock. Determine the probability that the stock of New Castle is undervalued at its current market price of $25 per share.
Suppose that in 2010, a $5 silver certificate form 1898 sold for 12,200. For this to have been true, what would the annual increase in the value of the certificate have been?
Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1. Ethier is financed with 55% debt and has a levered beta of 1.5. If the risk free rate is 6% and the market risk premium is 6%, how much is the additional premium that Ethier's s..
Staal Corporation will pay a $2.82 per share dividend next year. The company pledges to increase its dividend by 3 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock ..
General Mills has a $1,000 par value, 12 year bond outstanding with an annual coupon rate of 3.60% per year paid semi annually. Market interest rates on similar bonds are 12.70%. Calculate the bonds price today.
Eureka enterprises had an all equity cost of capital of 12 percent. When the firm switched to being levered its cost of equity increased to 13.4 percent and its pretax cost of debt was 7.5 percent. What was the firm's debt-equity ratio after the swit..
The two-year interest rate is 6.5% and the expected annual inflation rate is 3%. What is the expected real interest rate?
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