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Margarite's Enterprises is considering a new project that will require $345,000 for new fixed assets, $160,000 for inventory, and $35,000 for accounts receivable. Short-term debt is expected to increase by $110,000. The project has a 5-year life. The fixed assets will be depreciated straight-line to zero over the life of the project. At the end of the project, the fixed assets can be sold for 25 percent of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $550,000 and costs of $430,000. The tax rate is 35 percent and the required rate of return is 15 percent.
What is the amount of the earnings before interest and taxes for the first year of this project?
Consider a European call option on a non-dividend-paying stock where the stock price is $52, the strike price $50, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is one year. If in case (3) the option buyer has a 1% chance ..
In the hope of high returns, venture capitalists provide funds to finance new companies. However, potential competitors and structures of the market into which the new firm enters are extremely important in realization of profits.
A project will increase sales by $60,000 and cash expenses by $41,000. The project will cost $40,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of ..
It is often stated that a stock index arbitrage trade is easier to implement when the stock index futures contract price is above its theoretical level than when it is below that value. What institutional realities might make this statement true? Des..
Which of the following statements is true of zero coupon bonds?
Beach & Company reported net income of $40 million for last year. Depreciation expense totaled $18 million and capital expenditures came to $8 million. Free cash flow is expected to grow at a rate of 5% for the foreseeable future. What is the current..
A Firms bonds have a maturity of 10 years, with a 1000 face value, and an 8% coupon rate paid semi-annually. The bonds are callable in 5 years at 1050. They currently sell at 1100. What is the bonds Yield-To-Maturity?
DuBois can borrow funds from the factor at 3 percentage points over the prime rate (currently 9 percent). Determine the net annual financing cost of this factoring arrangement.
Automatic Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,090 per unit; variable cost = $310 per unit; fixed costs = $4.82 million; quantity = 72,000 units. What values should the company use for the fou..
During the past year, the Rawlins Co. paid $234,800 in interest along with $75,000 in dividends. The company issued $50,000 of stock and $200,000 of new debt. The company reduced the balance due on the old debt by $325,000. What is the amount of the ..
On 3 August 2011 Ross Creek Ltd declared and paid a dividend of $10000 from profits earned prior to its acquisition by Sebastopol Ltd. The directors consider that the value of the investment in Ross Creek Ltd has been impaired and have adjusted the p..
A company's $100 par perpetual preferred stock has a dividend growth rate of 7 percent and a required rate of return of 11 percent. The company's earnings are expected to grow at a constant rate of 3 percent per year. If the market price per share fo..
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