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1. Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $150,000 and has an IRR equal to 12 percent, and Project L costs $140,000 and has an IRR equal to 10 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equi- ty, and its component costs of capital are rdT 5 4%, rs 5 10%, and re 5 12.5%. If OTC expects to generate $230,000 in retained earnings this year, which project(s) should be purchased?
2. Tri-Q Supply Company is considering an ex- pansion project to increase sales. The project, which costs $2.6 million, has an IRR equal to 9.2 percent. Any portion of the project can be purchased. Tri-Q expects to retain $1.3 million of earnings this year. It can raise up to $420,000 in new debt with a before-tax cost equal to 5 per- cent; any additional debt will cost 7 percent before taxes. Tri-Q's cost of retained earnings is 12 percent, and its cost of new common equity is 14 percent. Its target capital structure consists of 35 percent debt and 65 percent common equity. If Tri-Q's marginal tax rate is 40 percent, what is the optimal capital budget?
what are two potential tests that can he conducted to verify the capm? what are the results of such tests? what is
Calculate the difference in payments on a 30-year mortgage at 9% interest versus a 15-year mortgage with 8.5% interest. Both mortgages are for $300,000 and have monthly payments. What is the difference in total dollars that will be paid to the len..
For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $30,000. If your tax rate is 34 percent and your discount rate is 8 percent, compute the EAC for both machines.
If this plan is followed for 10 years, how much should the monthly contributions be for the next 28 years in order to be able to withdraw, 10,000 at the end of each month from the account for the next 25 years. what is the total amount contributed..
Summarize two (2) new areas of knowledge you gained during this course. Discuss the manner in which these two (2) new areas of knowledge will benefit you in your current or future career
Dome Metals has credit sales of $180,000yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so it's customers take the full 60 days to pay. What is the averag..
GeKay stock is worth $100, or $80, or $60. Investors believe that each case is equally likely so that the current share price is the average, namely $80.
The value you obtain will apply to each of the six years. 2. what is the expected net present value? 3. should he buy the equipment? why or why not?
Suppose that transaction costs are zero, there are no barriers to trade and that Chinese products are identical to British items, would you expect the Yuan to appreciate,
analyze the ways in which a call option differs from a put option. suggest the circumstances under which an investor
What is block ownership? How does it affect corporate governance?
Cape Fear Energy raised (borrowed) $100 million by issuing an innovative new bond that is being referred to as a "Triennial" bond. The Triennial bonds, which have a par value of $1000, make an interest payment of $120 once every three years in perpet..
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