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Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply. 1. The machinery falls into the MACRS 3-year class. 2. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. 3. The firm's tax rate is 40%. 4. The loan have an interest rate of 15%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at year 4. 5. The lease terms call for $400,000 payments at the end of each of the next 4 years. 6. Bug Sky mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year. What is the NAL of the lease?
The T-bill rate is 7 percent. What is the value of the equity? What is the value of the debt?
What is the expected dollar cost of the forward hedge?- What is the expected dollar cost of the money market hedge?
For a stock that pays dividends:European call option values cannot be calculated under any circumstances. American call options are likely less valuable than European call options. American call options are likely more valuable than European call opt..
Greene Sisters has a DSO of 26 days. The company's average daily sales are $20,000. What is the level of its accounts receivable? Needham Pharmaceuticals has a profit margin of 5.5% and an equity multiplier of 2.2. Its sales are $110 million and it h..
One argument for why subsidiaries should be allowed to issue their own stock is that:
Shakila Corporation must pay its Japanese supplier ¥125 million in three months. Aziz could buy 10 three-month yen futures contracts (contract size is ¥12.5 million) at a price of $0.007940/¥. The current spot rate is ¥1=$0.007823. Diagram Shakila’s ..
State of economy probability of state of economy rate of return stock A Rate of return stock B. calculate expected return for the two stocks. calculate the standard deviation for the two stocks
The financial manager is worried that the current ratio indication of short-term liquidity is so bad that it will be difficult to obtain additional funding.
judy wins $1 million lottery. Instead of paying her a lump sum of $1 million today, the government offers her a payment stream of $50,000 a year over 20 years. The first payment will be made today. What is the value of the lottery assuming 5% interes..
A project under consideration has an internal rate of return of 14% and a beta of 0.7. The risk-free rate is 4%, and the expected rate of return on the market portfolio is 14%. Calculate the required return. Calculate the required return if its beta ..
Tucker's National Distributing has a current market value of equity of $10,665. Currently, the firm has excess cash of $640, total assets of$22,400, net income of $3,210, and 500 shares of stock outstanding. Tucker's is going to use all of its excess..
Wingler Communications Corporation (WCC) produces premium stereo headphones that sell for $28.80 per set, and this year's sales are expected to be 460,000 units. Variable production costs for the expected sales under present production methods are es..
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