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Consider a firm that this year generated free cash flow of $150million. The firm's cash is considered to grow by 2% anually towards infinity. The WACC (discount rate) is 10%
a) Value the firm in the scenario above
b) Consider now that the ECB increase interest rates. Hence the WACC will increase to 15%. Value the firm in this scenario
c) Consider now that an example where the firm's cash flows grow by 8% annually until t=5, after t=5, the growth rate is considered to slow down to 2% annually. Value the firm in this scenario.
Why might it be easier for an investor desiring to diversify his portfolio internationally to buy depository receipts rather than the actual shares of the company?
You are analyzing two companies that manufacture electronic toys – Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is relatively new company that has been operation for only the past two years. (high or low..
A price to book ratio considers
Determine the number of payments per month at which the costs of the two proposals would be equal, assuming that the processing fees ($0.15) and compensating balances ($3,000,000) remain constant.
If the center takes out a 5-year term loan that would be repaid in equal annual installments, how much will it owe to Bank South if Gary decides to pay off the loan early at the end of third year. Amount borrowed 250, 0000 and rate 8.06
Nokela Industries purchases a $43.2 million cyclo-converter. The cyclo-converter will be depreciated by $10.8 million per year over four years, starting this year. Suppose Nekelas tax rate is 40%. What impact will the cost of the purchase have on ear..
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.6 million in annu..
A home equity line of credit (HELOC) is, loosely speaking, like a credit card for your home. You can borrow money by drawing down on the line of credit. But, because the borrowed money is for the purpose of your home, the interest is tax-deductible m..
Daniel Electronics is considering a change in its target capital structure, which currently consists of 35% debt and 65% equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. Currently, the cost ..
Atlas Insurance wants to sell you an annuity which will pay you $550 per quarter for 20 years. You want to earn a minimum rate of return (APR) of 5.0 percent compounded quarterly. What is the most you are willing to pay as a lump sum today to buy thi..
Swenson’s is considering two mutually exclusive projects, Projects A and B, and has determined that the crossover rate for these projects is 11.7 percent.
Calculate the deadweight loss of a tax of $4 per unit levied on producers of super-sticky glue.- How does deadweight loss change if the tax is levied on consumers of super-sticky glue?
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