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Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.84 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. The firm has a target debtâ€"equity ratio of 0.75, a cost of equity of 12.4 percent, and an aftertax cost of debt of 5.2 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 3 percent to the cost of capital for such risky projects.
What is the maximum initial cost the company would be willing to pay for the project?
A company is 46% financed by risk free debt. The interest rate is 11%, the expected market risk premium is 9%, and the beta of the company's common stock is 0.56.
The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $50 million on a large-scale, integrated plant that will provide an expected cash flow stream of $8 million per year for 20..
Mother and daughter enterprises is a relatively new firm that appears to be on the road to great success. The company paid their first annual dividend yesterday in the amount of $.28 a share.
What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects
Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders.
Calculate the amount of money that Emily needs to set aside from her bonus this year to cover the down payment on a new car, assuming she can earn 6% on her savings. What if she could earn 10% on her savings
Days sales in inventory will decline from 100 to 45 days and sales will be offset by most of the additional costs of accounts payable associated with increased purchases.
Apply the Black-Scholes option valuation model to solve the following problems. P1. A stock sells for $30. What is the value of a one-year call option to buy the stock at $25, if debt currently yields 10 percent
You purchased 1,000 shares of the New Fund at an NAV of $27 per share at the beginning of the year. You paid a front-end load of 2%. The securities in which the fund invests increase in value by 11% during the year.
Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement.
Dandee Lions, Inc., has a cash balance of $97,000, accounts payable of $212,000, inventory of $195,000, accounts receivable of $311,000, notes payable of $57,000, and accrued wages and taxes of $71,000.
The optimal safety stock (which is on hand initially) is 1,200 bags. Each bag costs Green Thumb $4, inventory carrying costs are 20 percent, and the cost of placing an order with its supplier is $25.
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