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Aunt Bea’s Barbeque (ABB) has two independent investment opportunities this year: Project S costs $45,000, and it has an IRR equal to 11 percent; Project T costs $52,000 and its IRR is 8 percent. The firm’s weighted average cost of capital (WACC) is 9 percent as long as new common stock is not needed to finance capital budgeting projects, but its WACC is 12 percent if new common stock must be issued. ABB’s target capital structure is 70 percent debt and 30 percent common equity. The firm expects to generate net income of $39,000 this year. ABB follows stable, predictable dividend policy by increasing its dividend payment by 5 percent each year. If ABB paid $20,000 in dividends last year, and it continues to follow the stable, predictable dividend policy, which capital budgeting project(s) should it purchase?
How do credit managers manage the risks related to extending trade credit? Aside from late or non-payment, what other risks do you see with trade credit?
Florida Citrus Inc. (FCI) estimates its taxable income at $9,000,000. The company is considering expanding its product line by introducing a low-calorie sport drink for next year. It expects that the additional taxable income next year from this spor..
You notice in the WSJ a bond that is currently selling in the market for $1,070 with a coupon of 11% and a 20-year maturity. Using annual compounding, calculate the promised yield on this bond.
Your firm is contemplating the purchase of a new $800,000 computer-based production system. what are the NPV and IRR for this project?
Calculate the depreciation tax shield for this project in year 3.
The projected net income per year is $. (Do not include the dollar sign ($).)
Which of the following statements about flotation costs is incorrect: Flotation costs for debt is typically lower than flotation costs for equity. As a company issues more equity the flotation costs, as a percentage of the capital raised, decreases. ..
The amount of an invoice from Franklin Decks and Porches is $5182.94 with terms of 4/7, 2/15, n/30. If the invoice is dated August 15, what amount should be paid on August 25?
You own an equally weighted portfolio of 50 different stocks worth about $5,000,000. The stocks are from several different industries, and the portfolio is reasonably well diversified. Which do you think would provide you with the best overall hedge:..
Propose the importance of the financial account (from the BOP) to economic indicators. Explain the trade balance between the U.S. and China.
Based on the CAPM, which of the above shares are undervalued, overvalued or correctly valued on the share market? Show all calculations and reasons for your answers.
Calculate the weighted average cost of capital for Toronto Skaters Company.
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