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Windflower Farm is considering an investment in a new project, which would require $1300 worth of capital expenditures and an increase of $4500 in net working capital that will be recovered at the end of the project. Each year, starting at the end of the first year, the operating cash flows of the project will be $1700 for 5 years. The project is risky, so its WACC is 15%. What is the net present value of the project?
A bank purchased bonds for 102.5 million that has a par value of $100 million. The bonds have three years to maturity. The coupon rate is 12 percent. Calculate the yield to maturity on these bonds. Using your answer to part a, compute the duration of..
Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until the bond matures 15 years from now, at which time it will be redeemed for $5,600. What interest rate would you earn if you bought this bond at the offer pr..
Which of the following is an advantage of going public? There is low cost with going public.
Which of the following $20,000 investments is more profitable for you? Investment A offers an annual return of 5.95% and the return is tax free.
You have located the following information on Webb’s Heating & Air Conditioning: debt ratio is 58 percent, capital intensity is 1.20 times, profit margin is 12.9 percent, and the dividend payout is 29.00 percent. Calculate the sustainable growth rate..
Using NPV, IRR, MIRR and discounted payback (using 4 years as the bench mark) to determine if the project should be taken. Use the WACC calculated from (1).
A tax levied on a business will:
Your uncle will sell you 100 shares of stock for $62.50 per share You expect the company to grow steadily at an annual rate of 6 percent for the foreseeable future. The firm paid a dividend of $2.30 last year. If you require a rate of return of 10 pe..
Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 7% interest, compounded annually. How much will you have when the CD matures?
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class(1 yr 33.33%2 yr 44.45% 3 yr 14.81%) , and it will be sold after three ye..
Firms that achieve higher growth rates without seeking external financing
Your client is a biochemist who has discovered a technique to create a new biofuel. He estimates it will take him 2 years to make it economically feasible at a cost of $2,000,000. Assume that loan is set up as interest-only (meaning any accrued inter..
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