Healthy Potions, Inc., a pharmaceutical company, bought a machine at a cost of $2 million five years ago that produces pain-reliever medicine. The machine has been depreciated over the past five years, and the current book value is $700,000. The comp..
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You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 16 percent, –16 percent, 18 percent, 28 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year pe..
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Dahlia Manufacturing has the following two possible projects. The required return is 10 percent. Year Project Y Project Z 0 –$27,400 –$54,000 1 13,400 20,000 2 11,800 25,000 3 14,200 18,000 4 9,800 23,000 required: (a) What is the profitability index..
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Stock Y has a beta of .9 and an expected return of 11.2 percent. Stock Z has a beta of 0.5 and an expected return of 7.2 percent. If the risk-free rate is 5.0 percent and the market risk premium is 6.0 percent, the reward-to-risk ratios for stocks Y ..
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A six-year project for Little Egypt, Inc. results in additional accounts receivable of $150,000, additional inventory of $50,000, and additional accounts payable of $80,000 today. What is the change in the NPV of a project solely due to the additiona..
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Warren's Diner needed a new location. This establishment spent $65,000 to refurbish an old shop and create the current facility. The firm borrowed 75 percent of the refurbishment cost at 8 percent interest for 11 years. What is the amount of each mon..
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The income put in this account is not considered part of the individual's tax base.- It what ways is it desirable to exclude this income from the tax base? In what ways is it undesirable?
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The Nunnally Company has equal amounts of low-risk, average-risk, and high-risk projects. Nunnally estimates that its overall WACC is 12%. The CFO believes that this is the correct WACC for the company's average-risk projects, but that a lower rate s..
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Rick wants to send his son to University of Maryland 8 years from now. He estimates he will need $30,000 then. How much does Rick need to invest today, if his investment can grow by 5% per year, compounded quarterly?
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The Goodsmith Charitable foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. if the goodsmith foundation borrowed money this year, what would the after tax cost of debt be, ba..
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Suppose the dividends for the Seger Corporation over the past six years were $1.49, $1.57, $1.66, $1.74, $1.84, and $1.89, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
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How much would you expect the Small Mac to cost next year in pesos? - Again, assume a 1.12% U.S. Treasury rate, a 7.78% peso interest rate, and a spot rate that is 0.09230 peso/$.
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