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The Clothing Co. is looking at a project that will require and initial increase of $40,000 in net working capital and $100,000 in fixed assets. The project is expected to produce annual sales of $90,000 with associated costs of $60,000. The project has a 10-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35 percent. What are the operating cash flows for this project and what is the IRR for this entire project?
Fijisawa, Inc., is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay associated with the expansion would be $2,010,000, and the project would genera..
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $52,000 per year. Should the old riveting machine be replaced by the new one?
Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure? Its sales are projected to become less stable in the future. The bankruptcy laws are changed i..
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower-lender relationships. Assume the Mitaka Company has a sales volume of 130,000 units at a price of $30 a unit; variable c..
An insurance company is offering a new policy to its customers. Typically the policy is bought by a parent or grandparent for a child at the child’s birth. The details of the policy are as follows: The purchaser (say, the parent) makes the following ..
The Red Bud Co. pays a constant dividend of $2.30 a share. The company announced today that it will continue to do this for another 2 years after which time they will discontinue paying dividends permanently. What is one share of this stock worth tod..
Change in Cost of Capital. Assume that Naperville Co. will use equity to finance a project in Switzerland, while Lombard Co. will rely on a dollar-denominated loan to finance a project in Switzerland, and Addison Co. will rely on a Swiss franc-denomi..
What were Wallaces total long-term debt and total liabilities in 2013 - Find the best-case and worst-case NPVs. What is the probability of occurrence of the worst case if the cash flows are perfectly dependent
Describe the options trading strategies and in what types of investment environments these strategies could be employed. Discuss the potential risks and gains of each strategy.
A bond issued by company ABC has 7% coupon, 10 years to maturity, and is currently priced at $1010. What is the bond’s yield? (show the steps and calculations you did) Find the coupon payments. Draw the time-line diagram.
Given the following probability distribution describing your expectations concerning the return on this stock, compute your expected return?
The per-unit selling price is currently $0.97 and this price is expected to rise at a meager 1% annual rate over the next three years. If Carlyle expects to sell 5.5, 6.8, and 9.5 million units for the next three years, respectively, what is your est..
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