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Consider a project to supply 119 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $2,090,000 five years ago; if the land were sold today, it would net you $2,290,000 aftertax. The land can be sold for $2,490,000 after taxes in five years. You will need to install $5.59 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $690,000 at the end of the project. You will also need $790,000 in initial net working capital for the project, and an additional investment of $69,000 in every year thereafter. Your production costs are 0.69 cents per stamp, and you have fixed costs of $930,000 per year. If your tax rate is 35 percent and your required return on this project is 11 percent, what bid price should you submit on the contract?
The next dividend payment by Halestorm, Inc., will be $2.04 per share. What is the dividend yield? What is the expected capital gains yield?
Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 37%. The firm's bonds pay interest semiannually with a 5.2% co..
Three years ago, Joe bought a 5-year, 10% coupon paid semi annually bond for $1000. Currently, with interest rates having risen sharply, the bond is selling for $800 and you decide to sell it off. If you had re-invested the semi-annual coupons as you..
A stock has an expected return of 12.9 percent and a beta of 1.15, and the expected return on the market is 11.9 percent. What must the risk-free rate be?
Suppose the Federal Reserve purchases $10 billion worth of foreign currency in exchange for deposit accounts at the Federal Reserve. Show the changes that result from this transaction on the Fed’s balance sheet
Schaeffer Shippers announced on May 1 that it will pay a dividend of $1.20 per share on June 15 to all holders on record as of May 31st. The firm's stock price closed today at $42 a share. Assume all investors are in the 28 percent tax bracket. If to..
Bravo company is considering a plan to construct a new manufacturing plant to expand its operations. An attractive piece of land is available which could be purchased immediatley for $100,000. Bravo would build a plant on the land at a cost of $200,0..
Christensen & Assoc. is developing an asset financing plan. Christensen has $1,000,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 9%, and the current short-term rate is 6.5%. Christensen..
The security that represents equity or ownership of a corporation is. If your retirement plan has a vesting requirement, it must be
Which of the following assets most likely has the highest level of risk?
What is the common-size statement value of inventory?
Dunbar Corporation has $1000 face value bonds on the market with 12years to maturity, a YTM of 8%, and a current price of $1,226.08. The bonds make annual payments. What must the coupon rate be on Dunbars bonds?
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