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For 2016, Gourmet Kitchen Products reported $23 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of total invested capital. Its after-tax cost of capital is 8% and its federal-plus-state income tax rate was 34%. What was the firm's economic value added (EVA), that is how much value did management add to stockholders' wealth during 2016? Write out your answer completely. For example, 25 million should be entered as 25, 000, 000. Round your answer to the nearest dollar, if necessary.
There is an inverse relationship between interest rate changes and changes in the market price of outstanding bonds. Explain the logic behind this principle. Given this relationship, do you believe it is currently a good time to buy bonds? Why or why..
The Fed cuts the Federal Funds rate and the Discount rate and the Prime goes down to 3.5 percent. Al Truistyk owns an exercise center and needs to upgrade his equipment in order to meet his customers’ needs. The equipment costs $275,000 and the lende..
Let’s assume that you’re thinking about buying stock in West Coast Electronics. So far in your analysis, you’ve uncovered the following information: The stock pays annual dividends of $5.00 a share indefinitely. It trades at a P/E of 10 times earning..
Capital budgeting decisions include determining when long term investments, such as an equipment purchase, are necessary and worth pursuing. One method of capital budgeting process is to determine the Net Present Value. Discuss in detail how to calcu..
Goodwill arises when one company acquires another company for a price in excess of the fair market value of the net identifiable assets acquired. Goodwill should be depreciated. Goodwill must be evaluated annually to determine if there has been a los..
Assume two securities are negatively correlated. If these two securities are combined into an equally weighted portfolio, the portfolio standard deviation must be:
Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
The current spot exchange rate is $1.25 = €1.00 and the three-month forward rate is $1.30 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.20 = €1.00. If we decided to exercise this option immediately, what re..
Screenshot, Inc., just paid a dividend of $4.25 per share on its stock. The dividends are expected to grow at a constant rate of 3.8 percent per year, indefinitely. Assume investors require an 13.6 percent return on this stock. What is the expected p..
According to the Affordable Care Act and Reconciliation Act, a) What are some of its implications for financial managers. b) Who will bear its costs?
Sheaves Corp. has a debt-equity ratio of .9. What is the initial cost of the plant if the company raises all equity externally?
Crossfade Co. issued 15-year bonds two years ago at a coupon rate of 9.4 percent. The bonds make semi-annual payments. If these bonds currently sell for 105 percent of par value, what is the YTM? (Do not round intermediate calculations. Round your an..
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