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Zoso is a rental car company that is trying to determine whether to add 28 cars to its fleet. The company fully depreciates all its rental cars over five years using the straight-line method. The new cars are expected to generate $150,000 per year in earnings before taxes and depreciation for five years. The company is entirely financed by equity and has a 32 percent tax rate. The required return on the company's unlevered equity is 13.5 percent, and the new fleet will not change the risk of the company.
What is the maximum price that the company should be willing to pay for the new fleet of cars if it remains an all-equity company?
Suppose the company can purchase the fleet of cars for $389,000. Additionally, assume the company can issue $244,000 of five-year, 6.4 percent debt to finance the project. All principal will be repaid in one balloon payment at the end of the fifth year. What is the adjusted present value (APV) of the project?
Determine the annual payment on a $500,000, 12 percent business loan from a commercial bank that is to be amortized over a five-year period.
Weiland Co. shows the following information on its 2014 income statement: sales = $157,000; costs = $81,100; other expenses = $4,400; depreciation expense = $10,100; interest expense = $7,600; taxes = $18,830; dividends = $7,600.
Your parents will retire in 30 years. They currently have $330,000, and they think they will need $1,050,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds
YOu want to retire in 30 years. You deposit $20,000 in the account now and plan to save an equal amount each year for the next 30 years. Once you retire, you will need $675,000. r=6%.
Letitia borrowed $6,000 from her bank 2 years ago. The loan term is 4 years. Each year, she must repay the bank $1,500 plus the annual interest. Which type of loan does she have
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.
Your firm is contemplating the purchase of a new $703,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $68,400 at the end of that time.
Just Rolling Along Inc. was organized on May 1, 2012, by two college students who recognized an opportunity to make money while spending their days at a beach along Lake Michigan.
Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return
Your firm has an average collection period of 20 days. Current practice is to factor all receivables immediately at a 1.00 percent discount. What is the effective cost of borrowing in this case
A friend comes to you with the following information on company X. He tells you that the company has price to earnings ratio (P0/E1) of 16 and a dividend payout ratio (D1/E1) of 40%.
Bangor Company makes products C and D. Information for overhead costs and for the two products appears below. The company makes 50,000 units of product C each year and 20,000 units of product D.
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