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Your boss is considering an investment in new manufacturing equipment. The equipment costs $270,000 and will provide annual after-tax inflows of $45,000 at the end of each of the next 7 years. The firm’s market value debt/equity ratio is 25%, its cost of equity is 17%, and its pretax cost of debt is 9%. The firm’s tax rate is 40%. Assume the project is of approximately the same risk as the firm’s existing operations.
What is the NPV after the capital structure change?
What are the advantages and disadvantages of interstate banking? What has been the likely effect of the Gramm-Leach-Bliley Act on financial consolidation?
Income Statement Hermann Industries is forecasting the following income statement: Sales $4,000,000 Operating costs excluding depreciation & amortization 2,200,000 EBITDA $1,800,000 Depreciation and amortization 320,000 EBIT $1,480,000 Interest 280,0..
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payba..
A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 25 years sells at a price of $619.33. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..
Describe a hypothetical, community bank with approximately 30 employees. The bank has only one location—a 2,800 square foot building located downtown housing their 30 employees. Describe the relevant characteristics of this small bank in depth. For t..
Quantum Inc. has warrants outstanding that allow the holder to purchase 1.5 shares of stock per warrant at $22 per share (exercise price). Thus each individual share can be purchased at $22 with the warrant. What is the intrinsic (minimum) value of t..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon r..
What is the current yield of the bond today?
Discuss the economic aspects of the foreign corrupt practices act. What evidence is there on the economic affects of the act? How does the theory of finance illuminate payments to foreign officials as an investment? What is the significance of the Is..
What is the difference in PV between the two retirement options? Which retirement option will give you the greatest present value,
You have just been hired as a financial analyst for Basel Industries. What was the firm's end-of-year cash balance?
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. what is the size of the settlement?
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