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It has been 15 years since Quaker launched its original two products. Quaker has found that customers are relatively brand loyal. Specifically, once a family begins buying oatmeal, they keep purchasing boxes for a number of years (i.e., they become "purchasers"). The average "purchaser" family buys 27 boxes of oatmeal per year, and "non-purchaser" families buy zero boxes per year and never begin buying again. On average, each "purchaser" family has a 12.5%/year chance of stopping all oatmeal purchases, converting into a "non-purchaser" family. Assume that the profit per box of plain oatmeal is currently $0.50, the profit per box of Apples & Cinnamon is $0.30, and that purchasers buy twice as many Plain Oatmeal boxes as Apples & Cinnamon boxes each year. What is the lifetime value of a "purchaser"? (N.B.: you may assume that Quaker's cost of capital is 10% if you choose to use the discounted form of the LTVC. Use a five year horizon to calculate the lifetime value)
Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
The probability of either a booming economy or a recessionary economy is 5 percent each. What is the standard deviation of these expected returns?
Insert the following items in the appropriate section of the Statement of Cash Flows and indicate whether this increases or decreases cash flow:
Half-year convention does not apply to this asset. After 4 years, the rig is sold for $65,000. If the effective income tax rate is 40%, what is the after-tax net cash flow for the year of the sale.
Is it reasonable to hold all other factors constant? What other part of the calculation of the cost of equity is likely to change if expected inflation rises?
Why have two-thirds of Americans failed to prepare a will? Explain.
Consider the following tem-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years 1 through 10 are $200,000 per year. What is the payback period without discounting cash fl..
What is the firm's breakeven point in units? c. Calculate the dollar breakeven point in two ways. d. Sketch the Breakeven Diagram.
A firm evaluates all of its projects by applying the IRR rule. If the required return is 18%, should the firm accept the following project?
What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 20 percent each in A and B, and 60 percent in C?
The main firm is a zero growth firm with an expected EBIT of $100,000 and a corporate tax rate of 30%. Main uses $500000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. What is Main's cost of equity?
Given the following information, determine the beta coefficient for Stock J that is consistent with equilibrium: rJ = 13.5%; rRF = 6.15%; rM = 10.5%. Round your answer to two decimal places.
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