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A company is considering a new 5-year project that requires an initial fixed asset investment of $2.6 million. The fixed asset will be depreciated straight line to $100,000 over 5 years, after which, it will have a market value of $350,000. The project requires an initial investment of $425,000 in NWC, which will be recovered at the end of the project. It will generate $3,040,000 in incremental annual sales, and has annual costs of $1,056,000. The tax rate is 30% and the required return is 12%.
A. What is the aftertax salvage value of the fixed asset?
B. What is the operating cash flow of the project?
C. What is the NPV of this project? Should the firm proceed?
Four (4) years ago the Zappa Corporation issued a 20-year, 7% annual coupon bond at a price of $1,200. If interest rates have remained unchanged what is the bond's current yield today?
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Suppose that the Modigliani-Miller assumptions hold, and we have no taxes. Supertrade Inc. is currently a fully equity financed company. It has 10,000 shares with a price of $200 each. The return on its shares is currently 10%. What is the expected r..
What is the discounted payback period for the project assuming a discount rate of 10 percent?
If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 −30% −11% Mild recession 0.25 −12% 8% Normal growth 0.45 6% 2% Boom 0.20 39% 5% a. Calculate the values of mean return and var..
The net present value represents
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Why are these strategies so effective and are these strategies vitally important to the company's ability to build their brand?
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