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i) Suppose drug retailer CVS has an equity beta of 0.80 and a debt-equity ratio of 0.10. Estimate its asset beta assuming its debt beta is zero. Suppose CVS were to increase its leverage so that its debt-equity ratio was 0.50. Assuming its debt beta were still zero, what would you expect its equity beta to be after the increase in leverage?
ii) Suppose ALCO plans to pay $60 million in interest each year for the next eight years, and then repay the principal of $1 billion in year 8. These payments are risk free, and ALCO's marginal tax rate will remain 39% throughout this period. If the risk-free interest rate is 6%, by how much does the interest tax shield increase the value of ALCO?
iii) Harris Solutions expects to have free cash flow in the coming year of $1.75 million, and its free cash flow is expected to grow at a rate of 3.5% per year thereafter. Harris Solutions has an equity cost of capital of 12% and a debt cost of capital of 7%, and it pays a corporate tax rate of 40%. If Harris Solutions maintains a debtequity ratio of 2.5, what is the value of its interest tax shield?
Do fame has any bearing on hackers desire to hack, whether it be when they first start out or in correlation to money or destruction?
Vilas Company is considering a capital investment of $190,100 in additional productive facilities. The new machinery is expected to have a useful life.
Assume that National Waferonics has before it a proposal for a 4 year financial lease. The company constructs a table. The bottom line of its table shows the lease cash flows:
Investment B is a 10 year, annually compounded lump-sum investment with an interest rate of 7%.
What is the true cost of building the new assembly line after taking flotation costs into account?
Calculate the NPV of this project with detailed working notes and explanation and decide whether this project should be undertaken
A proposed new investment has projected sales of $836,000. Variable costs are 56 percent of sales, and fixed costs are $187,540; depreciation is $96,500. Assume a tax rate of 40 percent.
The next day, terrible news hits the mortgage markets, and mortgage rates jump to 13%. What is the market value of Oldhat’s mortgages? What is Oldhat’s “market value” capital ratio?
Compute the net proceeds to the Presley Corporation. (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
a. What is the ARR for this project? Blank 1%. Case sensitive. Type in 20.00 (two decimal places) for 20%.
Suppose a central bank is trying to decide whether to target money growth. - What warning might you issue to the central bank when they ask your advice?
Assume the financial institutions are required to keep 11% in reserve and ratio of individuals' currency holdings to their deposits is 21%. What is money multiplier?
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