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Problem 1: Suppose you have just inherited 10 acres of land from your long-lost uncle. The acreage is currently undeveloped and unused, but after some research, you discover that it might be a great site for a pecan orchard at some point in the future. You think it will cost $0.5M to plant the trees, install an irrigation system, and purchase the required maintenance and harvesting equipment, and estimate that pecan orchards typically have a 5% cash flow yield. Unfortunately, based on the forecasted pecan prices, you have estimated that the discounted expected value of the orchard would currently only be $0.4M. Due to weather and other factors, however, there is a significant amount of uncertainty in the pecan price forecast and the actual value of the orchard in the future. You estimate that the volatility of the value of the orchard is 20%. The current risk free rate is 5%.
a) Given that the orchard project is not a good investment at the current time, you decide to look into selling the property. However, you want to include the value of the option to plant an orchard in the value of the land. What is that value? Show your calculations in your worksheet.
b) If you don't receive an acceptable offer for the land and end up keeping it, when would you go ahead with the orchard project?
John n charges you? 5% and Mary charges you? 10%. What is your combined? before-tax cost of borrowing from your? friends?
Blades Corporation is forecasting EPS of $2.50 this year on its 450,000 shares of stock outstanding. Its capital budget for the upcoming year will be $750,000.
Mustard Patch Doll Company needs to purchase new plastic moulding machines to meet the demand for its product. The cost of the equipment is $100,000.
You buy a stock on margin with $10,000 of your own money and an $8,000 loan from your broker. The rate of interest on your margin loan is 5%. If the expected stock return is 18% with a standard deviation of 26%, what is the expected 5% VaR of y..
What's the future value of $25,000 after 23 years if the appropriate interest rate is 15.25%, compounded annually?
Becker Financial recently declared a 2-for-1 stock split. Prior to the split, the stock sold for $85 per share. If the firm's total market value is unchanged by the split, what will the stock price be following the split?
If your required return is 13 percent, calculate the NPV if you purchase the machine today. (Do not round intermediate calculations and round your answer.
Cascade Water Company (CWC) currently has 30,000,000 shares of common stock out- standing that trade at a price of $42 per share. CWC also has 500,000 bonds outstanding that currently trade at $923.38 each.
Prepare a statement of retained earnings for the year ended December 31, 2012, for Hayes Enterprises. Calculate the firm's 2012 earnings per share (EPS).How large a per-share cash dividend did the firm pay on common stock during 2012?
You purchase a bond with a coupon rate of 9.9 percent and a clean price of $890. If the next semiannual coupon payment is due in two months.
How do you represent your need to reduce the DSO? How much cash does 30 days or 60 days of reduction mean to the company? Be specific, do the math!
When looking at competitive strategy choices in strategic compensation what's a company that uses a lowest cost strategy and one that uses a differentiation
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