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A firm has $100 million in cash on hand and a debt obligation of $100 million due in the next period. With this cash, it can take on one of two projects-A or B-which cost $100 million each. Assume that the firm cannot raise any additional outside funds. If the economy is favorable, project A will pay $120 million and project B will pay $101 million. If the economy is unfavorable, project A will pay $60 million and project B will pay $101 million. Assume that investors are risk neutral, there are no taxes or direct costs of bankruptcy, the riskless interest rate is zero, and the probability of each state is .5.
a. What is the NPV of each project?
b. Which project will equity holders want the managers to take? Why?
Almond vs. dark chocolate A statistics student wondered whether the color distribution for Almond M&M's candies is the same as for Dark Chocolate Peanut M&M's. Was this an observational study or an experiment? Explain.
What are the present-day tax savings from your retirement planning?
Question 1. Black Hill Inc. sells $100 million worth of 21-year to maturity 8.91% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $988 for each $1,000 bond. What is the before-tax cost of capital for this debt financing..
Mark Anderson's Legal Aid has the following estimated revenue. Feb $16,400. Mar $14,800. Apr $17,900. May $17,500. Assume each month has 30 days and the accounts receivable period is 60 days. How much does the firm expect to collect in May?
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If the appropriate interest rate is 13 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year.
Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit?
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