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Alex is a new intern in an investment bank. She is trying to value a firm using non-constant growth model. Firm's free cash flow in current year is $10m. FCF will grow by 12%, 10%, and 8% in years 1, 2, and 3, respectively. Alex assumes WACC=10%, uses the wrong formulas and finds that firm value is $108.33m. Alex's manager says the actual WACC of firm should be 12% and want Alex to re-calculate correct firm value. What is the correct firm value?
Effective interest method vs. Straight-line method
What is the value of the growing perpetuity?
Indicating that students can choose their percent of deductible.
Your investment advisor has told you that the yield-to-maturity on this bond is 7.5%. What should be the price of this bond?
The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $2.7 million. Compute the net present value.
A mortgage broker is offering a $289,000 33-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 5.5 percent APR interest rate. After the second year, the mortgage interest rate charg..
In the Industrial Supply Company example (Table 4.4) it was assumed that the company’s fixed assets were being used at nearly full capacity and that net fixed assets would have to increase proportionately as sales increased.
Bear Co. wants to issue a new 10-year bonds to support its expansion plans. The company currently has 5.3 percent coupon bonds on the market that sell for $1,075, make semiannual payments and mature in 10 years. The face value of the bond is $1,000. ..
Compare and contrast hedge funds and mutual funds, and discuss the strategies of hedge funds and how they differ from mutual fund strategies.
FITCO is considering the purchase of new equipment. FITCO is in the 40 percent tax bracket, and its cost of capital is 9 percent.
Create a cash flow that has a rate of return at 10% and a rate of return at 20%. Plot the present worth of your cash flow to show the rates of return.
What is Martin Corporation’s current breakeven point in terms of Quantity, Sales Dollars
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