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Dynamics Telecommunications Corp. has made an investment in another company that will guarantee it a cash flow of $30,000 each year for the next five years. If the company uses a discount rate of 11 percent on its investments, what is the present value of this investment? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)
Present value of investment
Continuing with the RJR situation - an LBO means that the take-over company borrows an enormous amount of money (often by issuing speculative, or "junk" bonds) and uses those borrowed funds to buy-back the common stock. After the take-over, which of ..
Supposed that Volkswagen plans to import 250 Golfs from its plant in Dresden, Germany, to rebadge them as "CTS" and sell them in the US via their dealerships. Explain how Volkswagen can use currency futures to hedge its exchange risk. How many future..
Indicate what account is impacted and the amount of the impact. Also, tell where the account will be presented on the financial statement. Assume a 35% tax rate if needed. An automobile dealer sells for $138,000 an extremely rare Invicta, which it pu..
What are agency costs, and how are agency costs of financial distress different from agency benefits of leverage? Explain their impact on calculating the value of a firm with financial distress.
Jeffrey Yaffe, CFO of Koffee Enterprises, is evaluating a 10-year, 5.10 percent loan with gross proceeds of $5,930,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 1.20 percent of gross proceeds and wi..
In the early 1980s, inflation rates soared, pushing up ________, as explained by the ________.
You are considering buying a 2012 Honda Civic that costs $15,000. You have arranged to finance $10,000 of the purchase price by borrowing money from your bank. According to the loan agreement, the interest is 6%, compounded monthly, and you must make..
Lamar Baily purchased a 7 percent coupon corporate bond that matured in 10 years and paid interest semiannually. He paid $ 2,800 and six months later, immediately following an interest payment, he sold the bond. At the time of sale, the market intere..
Consider the following statistics for a household's annual cash flow: Net Cash Flow ($3,400) ; Nondiscretionary Expenses ($32,750); Discretionary Expenses ($9,250); Retirement Investments ($13,500) and Debt Repayment ($4750). Calculate the Gross Savi..
Mitts Cosmetics Co.'s stock price is $35.62, and it recently paid a $1.50 dividend. This dividend is expected to grow by 30% for the next 3 years, then grow forever at a constant rate, g; and rs = 14%. At what constant rate is the stock expected to g..
Prepare an amortization schedule for a five-year loan of $67,500. The interest rate is 7 percent per year, and the loan calls for equal annual payments. How much interest paid in the third year ? How much total interest is paid over the life of the l..
Why are equity investment returns typically more than bond returns? A) Equities are riskier than bonds B) Bonds are riskier than equities C) Bonds pay interest payments D) Both A & C
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