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1. What are the strengths and weaknesses of the various capital budgeting/investment analysis tools? Which methodology do you prefer? Why? What are the assumptions of each methodology? How could you improve each one to make it more useful?
2. An issue of common stock is selling for $57.10. The year end dividend is expected to be $3.35 assuming a constant growth rate of 5%. What is the required rate of return? (Round your answer to 1 decimal place.) 12.9, 11.4, 10.9, 10.4
3. The coupon rate on a debt issue is 7%. If the yield to maturity on the debt is 10%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 40%? (Round your answer to 2 decimal places.) 4.65% 7.35% 6.00% 8.15%.
Mustaine Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $279,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven year..
Consider an asset that costs $730,000 and is depreciated straight-line to zero over its eight- year tax life. The asset is to be used in a five-year project. If the relevant income tax rate is 40 percent, and the capital gains rate is 20 percent, wha..
To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000...
A company’s stock value changes due to: Capital Budgeting is an important management function because. Ordinary dividend payments are:.
Price Corp. is considering selling to a group of new customers and creating new annual sales of $90,000. 5% will be uncollectible. The collection cost on these accounts is 3% of new sales, the cost of producing and selling is 80% of sales and the fir..
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave?
What is the price of this stock today given a required return of 15 percent.
What is the value of the option to wait if the discount rate is 10%?
Calculate the NPV of this project.
The Imaginary Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $983.90 per bond. If..
As a knowledgeable investor, would you prefer to invest in a highly efficient market or a relatively inefficient market? Explain. As an inexperienced investor, would you prefer to invest in a highly efficient market or a relatively inefficient market..
In the statement of cash flows, depreciation charges are reported as a use of cash.
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