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Suppose Lucent Technologies has an equity costof capital of 10%, market capitalization of $10.8 billion, and anenterprise value of $14.4 billion. Suppose Lucent's debt cost of capital is 6.1% and its marginal tax rate is 35%.a.) What is Lucent's WACC?b.) If Lucent maintains a constant debt-equityratio, what is the value of a project with average risk and thefollowing free cash flows?Year 0 1 2 3FCF -100 50 100 70c.) If Lucent maintains its debt-equity ratio, whatis the debt capacity of the project in part (b)?d.) What is Lucent's unlevered cost of capital?e.) What is the unlevered value of the project?f.) What are the income tax shields from the project? What is their present value?g.) Show that the APV of Lucent's projec tmatches the value computed using the WACC method.h.) What is the free cashflow to equity for this project?i.) What is its NPV computed using the FTEmethod? How does it compare with the NPV based on the WACCmethod?
plot the approximate yield curve of a much riskier lower-rated company with a much higher risk of defaulting on its bonds.
Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasbile CAL. What is the standard deviation of your portfolio? And what is the proportion invested in the stock fund?
Determine the present values if $5,000 in the future (i.e., at the end of each indicated time period) in each of the following situations:
Suppose if you were managing a small bank or insurance agency in your local community, what current and future trends in financial services & institutions would likely have the greatest impact on institution.
Compute the failure rate for six transformers that were tested for 600 hours each, three of which failed after 100,175, and 350 hours.
A portfolio is expected to return 16% in a booming economy, 12% in a normal economy, and 22% in a recessionary economy.
Choose assumptions that absolutely must remain valid. That is, if these assumptions don't hold true, international strategy success is in immediate danger.
You will save $260,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $85,000 (this is a one-time reduction). If the tax rate is 30 percent, what is the IRR for this project.
What is the present value of a five-year lease arrangement with an interest rate of 9% that requires annual payments of $10,000 per year with the first payment being due now?
Dividends have grown at the rate of 5.1% per year and are expected to continue to do so for the forseeable future. What is Crypton's cost of capital where the firm's tax rate is 30%.
What was Harley Davidson total debt in 2011? Round your answer to the nearest cent.
At what cost of capital will the net present value of the two projects be the same? (That is, what is the "crossover" rate?)
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