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HealthWorks Inc, a chain of workout facilities, is looking at a new type of exercise equipment for all of its stores. The total amount of investment will be $250 today and the equipment is expected to last for 5 years with no salvage value. In calculating project cash flows straight line depreciation will be used. Annual cash inflows connected with the project are expected to be $500 at the end of each year for 5 years and annual cash outflows connected with the project are expected to be $325 at the end of each year for 5 years. HealthWorks pays tax at the rate of 30%. What is the net present value of the project if the required rate of return is 9%.
What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $730 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized ..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Assume sigma=0.15, nu=0.10, and current stock price $32. Monthly interest rate is 1%. Compute present values of the following options expiring in 3 months. (a) A European call option with strike $30, assuming $2 dividend in 40 days. (b) European put ..
Springboro Tech is a young start-up company. No dividends will be paid on the stock over the next 10 years, because the firm needs to plow back its earnings to fuel growth. The company will pay a $9.5 per share dividend in 11 years (D11=$9.5) and wil..
Your firm has an average collection period of 31 days. Current practice is to factor all receivables immediately at a discount of 1.2 percent. What is the effective cost of borrowing in this case? (Do not round intermediate calculations. Enter your a..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next few years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $3 per share dividend in year 6 and wi..
The lender deducts this interest amount from the loan up front and gives you $17,500. In this case, we say that the discount is $2,500. What is the effective interest rate?
Suppose the coupon rate on a semi-annual bond is 6%, the YTM is 8.5%, the par-value of the bond is $1000, and the maturity is 1 year. Calculate the fair price of the coupon bond. Please show the FORMULA USED
What was the motivation for the creation of higher-level programming languages? How did the introduction of higher-level programming languages change computing?
A project is expected to create operating cash flows of $33,000 a year for three years. The initial cost of the fixed assets is $68,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be req..
A stock has had returns of −19.8 percent, 29.8 percent, 33.6 percent, −10.9 percent, 35.6 percent, and 27.8 percent over the last six years. What are the arithmetic and geometric returns for the stock?
A company delivered $10,000 of goods to a customer that agreed to pay cash within 30 days. The goods had cost $8,000 to manufacture. Which of the following items would be increased by this sales transaction?
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