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The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $54,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $ 22,000 2 25,000 3 28,000 4 14,000 5 7,000 a. If the cost of capital is 12 percent, what is the net present value of selecting a new machine? (Do not round intermediate calculations and round your final answer to 2 decimal places.) b. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
We want to determine cost of equity for Firm A. We know that Firm A’s target debt-to equity ratio is 2.00. We also know that there is a comparable firm which has exactly same lines of business and therefore is expected to have the same level of busin..
Laverne Industries stock has a beta of 1.35. The company just paid a dividend of $.85, and the dividends are expected to grow at 5 percent. The expected return of the market is 11.5 percent, and Treasury bills are yielding 5 percent. The most recent ..
Use an AD-AS graph to show the effect of the decline in income in Europe on output and the price level in the United States in the short run and in the long run.
Compute the value of Flower Valley Company bonds if investors’ required rate of return is 11.00 percent.
Using the returns shown above, calculate the average returns, the variances, and the standard deviations for X and Y.
Sandy wiches sells fresh sandwiches at a beach location, management has determined that on a typical day, demand can be described by the following equation: Qd = 1200 - 200Px if p = $3.00, determine the number of sandwiches sold and the elasticity of..
On the basis of these data, what is the real risk-free rate of return?
At what price should the call be trading? Describe conceptually what is going on with the change in price in part (b).
Airborne Airlines Inc. has a $1,000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $108 and is currently selling for $940. Airborne is in a 30 percent tax bracket. Compute the yield to maturity on..
The firm is currently contemplating using $200,000 of its earnings to either pay cash dividends or to buy back shares at $10.40 per share. Approximately how many shares can the firm repurchase at the $10.40 per share price using the funds that would ..
Determine the firm’s rd from the 10-K report in the Note to the Long-term Debt, where rd = ∑(wdi*rdi), where wdi = the weight of debt for each bond and rdi is the coupon rate for each bond. Using Amazon 2015 data
Universal Exports is expected to pay the following dividends over the next four years: $7, $5, $3, and $1. Afterwards the company is expected to maintain a constant 5 percent growth rate in dividends. If the required return is 16 percent, what is the..
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