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Cyberdyne Systems generates perpetual annual EBIT of $200. (Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year.) Cyberdyne has 1,000 shares outstanding which trade for $1.33. The stockholders of Cyberdyne require a return of 9%. Assume that Cyberdyne is initially all-equity financed. It is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares. The repurchased shares will be canceled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 3%. Assume that the tax rate is 40%.
What price does Cyberdyne have to offer for repurchased shares such that the repurchase price is equal to the price that prevails after the repurchase is complete?
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5,000,000 investment in net operating working capital. The company tax rate is 40%. Wha..
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Use the prospective method to find the sixth terminal reserve for an 8-year endowment policy of $2,000 issued to a 30-year-old woman.
International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consis..
Dynamic Engineering has 100,000 shares of stock outstanding trading at a price of $85 per share. The firm would prefer to have its stock trade at $17 per share. Which of the following choices would achieve this objective?
Diidends are then expected to grow at 3% indefinitely. Shareholders required return on equity is 15%. At what price will XYZcorp's shares sell?
What is the best estimate of the stock's current intrinsic price? If the market price is $33 do you buy or sell?
There is an inflation rate of 4% and a growth rate of 3% What is the nominal after-tax terminal value?
Why do you think that Pimlico Ltd established the subsidiary in China instead of Japan? Assume no major country risk barriers.
What level of sales would Swann have to obtain to generate $2,000,000 in net income?
How does the mission of Patagonia differ from most other companies?
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