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Question - Sturm Ruger & Company (RGR) expects free cash flows of $83 million or $67 million each year, with each outcome being equally likely. RGR's corporate tax rate under the new U.S. corporate tax rate is 20%, and its unlevered cost of capital is 10%. The firm also has outstanding debt of $2.0 million and expects to maintain this level of debt permanently. (Show your calculations)
a. What is the value of RGR without leverage?
b. What is the value of RGR with leverage?
Consider a porfolio which consists of long position (buy) of 200 European Call options C1, short position (sell) of 100 European Put options P1.Delta(C1) = 0.6, delta(P1) = -0.4, T(C1) =2.2, T(P1) =1.5, vega(C1) = 0.25, vega (P1) = 1.8.
Why do the users of financial statements require information to be accurate and free from any material errors? What are some problems that might occur if users of financial statements rely on inaccurate statements?
What is the relationship between the concepts of net present value and shareholder wealth maximization?
Using the B/S prepared at the end of FY 2008 and FY 2009, Is the amount in CFO a cash inflow or outflow? What about CFI and CFF? What do you infer from these amounts?
Corporation total assets fluctuate between 320K and 410K, while its fixed assets remain constant a 260K. If the company follow a maturity matching or moderate working capital financing policy,
What is the present value of costs of each alternative? Do not round intermediate calculations. Round your answers to the nearest dollar, if necessary.
Provide several examples of financial statement accounts that are often loosely referred to as reserves. What is typically common about all financial statement accounts that are informally referred to as reserves?
Draw a net present value profile for the investment and observe the discount rate at which the net present value is zero.
Which of A and B has the least total risk? The least systematic risk?
The number of claims N in a year has a discrete distribution: Pr[N=k]=0.1(4-k) for k=0,1,2,3. The amount for each claim has mean 300 and variance 30000. The distribution of amount per claim is independent of N. Calculate the mean and variance of t..
Someone wants to invest in my company has given my these options. What option is best and why?
What is DMI's cost of marginal bad debt expense resulting from the relaxation of its credit standards? d. What is DMI's net profit/loss from adopting the new credit standards? Should DMI relax its credit standards?
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