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1. The Blueberry Company is considering a project which will cost $463 initially. The project will not produce any cash flows for the first 3 years. Starting in year 4, the project will produce cash inflows of $543 a year for 5 years. This project is risky, so the firm has assigned it a discount rate of 19.1 percent. What is the net present value?
2. Analyze the performance of the following firm: Blank This Year Last Year Assets 500 478 Liabilities 100 100 Sales 480 478 EBIT 140 149 Interest 10 10 Taxes 65 70 Net Income 65 69 (This year’s ratios: ROE .163, GROA .28, FE .581, GPM .292, ATO .96, EM 1.25, IR .929, TR .5)
The face value are not affected by risk shifting that occurs after they buy the bonds, because the effect is only on market value.
Find the “crude” (which does not use regression) term structure of discount factor, spot interest rate and forward interest rate.
You purchased a stock at the end of the prior year at a price of $101. At the end of this year the stock pays a dividend of $1.80 and you sell the stock for $117. What is your return for the year? Now suppose that dividends are taxed at 15 percent an..
Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale.
Henri of Henri’s French Cuisine (HFC), a chain of 12 restaurants, is trying to decide if it makes sense to outsource the purchasing function.
Assume Mess stock has a beta of 1.2. If the risk-free rate is 7 percent and the market return is 10 percent, what is the expected return of Mess stock?
Explain how an investor can sythesize the leverage that is proposed by Equity Inc. Under these conditions, what is the value of restructuring to a firm?
Suppose there are corporate taxes with tax rate as 40%. Compute the project value again under different strategies. Which is better?
In an automobile insurance policy, the only limit of liability
Stock A has a beta of 1.2 and a standard deviation of returns of 14%. Stock B has a beta of 1.8 and a standard deviation of returns of 18%. If the risk free rate of return increases and the market risk premium remains constant, then _________
Calculate the required rate of return for Hope Inc., assuming that (1) investors expect a 2.0% rate of inflation in the future,
What was the capital gain of the TIPS in percentage terms?
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