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Damon Corp. is considering a new product that would require an investment of $21 million at t= 0. If the new product is well received, then the project would produce after-tax cash flows of $11 million at the end of each of the next 3 years (t= 1,2,3), but if the market did not like the product, then the cash flows would be only $4 million per year, There is a 50% probability that the market will be good. Damon could delay the project for a year while it could conduct a test to determine if demand would be strong or weak. The project's cost and expected annual cash flows (expected at t=0) are the same whether the project is delayed or not. The project WACC is 10.8%. What is the value of the project after considering the investment timing option?
The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,048.77, what is the yield that Trevor would earn by selling the bonds today?
The firm will not be issuing any new common stock. What is Quigley's WACC?
1) Assume your instructor has two bonds in his portfolio. Both have face values of $1,000 and pay a 10% annual coupon rate. Bond L (longer maturity) matures in 15 years and Bond S (shorter maturity) matures in 1 year
You have a depreciation expense of $506,000 and a tax rate of 35%. What is your depreciation tax shield?
Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000.
A 5 year par value bond ($1,000) has an annual coupon rate of 8%. What is the modified duration of the bond? Use duration table (Note: discount rate is 8%)
Computation of Break even volume of service revenue - Find the revenue must the firm generate to earn an after-tax net income of $100,000? and consider the firm's income tax rate rises to 40 percent. What will happen to the break-even level of consul..
A stock has an expected return of 12.20 percent and a beta of 1.18, and the expected return on the market is 11.20 percent. What must the risk-free rate be?
A share of stock is currently selling for $31.80. If the anticipated constant growth rate for dividends is 6% and investors are seeking a 16% return, what is the dividend just paid?
The taxable gift was $45,000, because his uncle made another gift to Bud for $20,000 in January. The uncle paid gift tax of $1,500.
You are considering buying some stock in Continental Grain. Which of the following are examples of non-diversifiable risks?
An investment has an expected return of 8% per year with a standard deviation of 4%. Assuming that the returns on this investment are at least roughly normally distributed, how frequently do you expect to lose money?
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