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You purchased land 3 years ago for $40000 and believe its market value is now $75000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $165000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $200000 each year, while expenses will be a mere $25000 each year. The initial working capital requirement will be $10000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 11%. What is the net present value of this project?
You are trying to estimate a price per share on an initial public offering of a company involved in environmental waste disposal.
The stock of Tips, Inc., a new firm operating a chain of sports betting parlors, has just been sold in an initial public offering at a price of $25 per share. One week after this offering, the stock has risen in value to $35. You believe the stock wi..
If the decision maker knows nothing about the probabilities of the three states of nature, what is the recommended decision using the optimistic, conservative.
Compare the results of the present value of a $6,000 ordinary annuity at 10 percent interest for 10 years with the present value of a $6,000 annuity due at 10 percent interest for 11 years. Explain the difference.
Sunshine Clinic purchases a piece of equipment for $250 with a 2-15 net 30 provision. What is the effective interest rate if the clinic pays on day 16? On day 3
Bluechips has a new project that will increase earnings by $200,000 in perpetuity. Calculate the new PE ratio of the firm. PE ratio times.
How do the various functional departments of an organization usefinancial planning (i.e. marketing, operations, sales, executivemanagement, finance, etc.)?
Suppose the spot rates for 1 and 2 years are s1=6.3% and s2=6.9% with annual compounding. Recall that in this course interest rates are always quoted on an annual basis unless otherwise specified. What is the discount rate d(0,2)?
Find out an estimate of the risk-free rate of interest, krf. To obtain this value, go to Bloomberg.com and use the U.S 10 year treasury bond rate as the risk free rate.
(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value and matures in 25 years. The markers required yield to maturity on a comparable-risk bond is 8 percent.
What is the approximate yield to maturity for a 9-year bond that pays 9 interest on a $1000 face value annually if the bond sells for $900?
Hedging with Futures: - Explain why some futures contracts may be more suitable than others for hedging exposure to interest rate risk.
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