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Your firm anticipates a breakthrough in the way they drilled for gas and expect the new method to be put in place soon. They expect their first cash flow of $800,000 from this method four years for today. In other words, their first cash flow is 4 years from today. They also expect that the cash flow to grow by 2% indefinitely and they want to assume a conservative interest rate of 6%. What is the present value of this cash flow today?
Let the probability of success on a Bernoulli trial be 0.30. a. In five Bernoulli trials, what is the probability that there will be 4 failures? (Do not round intermediate calculations. Round your final answers to 4 decimal places.) Probability b. In..
During the year she set aside $100 per month from her paycheck for savings and borrowed $500 from her cousin that she must pay back in January of next year. What was her net worth at the end of the year?
The HWS company was recently formed to manufacture a new product. With the following capital structure: 9% debentures of 2002 ($1000 Par) $6,000,000 7% Preferred stock ($100 Par) $2,000,000 Common Stock (320,000 shs.) $8,000,000 total $16,000,000 The..
Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
What is the value of a European call option with an exercise price of $40 and a maturity date six months from now if the stock price is $28, the instantaneous variance of the stock price is .5, and the risk-free rate is 6%?
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..
Which of the following would cause a firm to hold more cash today?
Zoot Industries stock has a beta of 1.20. The company just paid a dividend of $.50, and the dividends are expected to grow at 6 percent. The expected return on the market is 11 percent, and Treasury bills are yielding 6.2 percent. The most recent sto..
The interest is compounded monthly. What is the annual percentage rate (nominal rate) on this account?
LIBOR as the index representing the market interest rate.
When valuing a semiannual coupon bond, the time period (N) in the present value formula is assumed to have a value of periods.
Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over th..
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