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AMS Company has unexpectedly generated a one-time extra $5 million in cash flow this year. After announcing the extra cash flow, AMS stock price was $55 per share (it has 1 million shares outstanding). The managers are considering spending the $5 million on a project that would generate a single cash flow of $5.5 million in one year, which they would then use to repurchase shares. Assume the cost of capital for the project is 12%.
a. If they decide on the investment, what will happen to the price per share?
b. If they instead use the $5 million to repurchase stock immediately, what will be the price per share?
c. Which decision is better and why?
Estimate the beta of an unlevered firm in the commuter airline business based on Jaxair's market-determined beta. (Hint: This is a levered beta
Noble Bicycles of Glen Arbor, Michigan, is a small batch manufacturer of high-end bicycles. That is, it typically builds bicycles in batches of one to three.
Why are spending-switching policies more effective in restoring external balance, and spending-changing policies better for restoring internal balance?
Your local bank is offering a new type of retirement savings account. An initial deposit is made to the account when it is opened.
What activities are involved in managing the company’s cash flows?
question 1 mercy medical mega center a tax paying entity has made the decision to purchase a new laser surgical device.
The common stock obtained upon conversion is selling for $54 per share. What is the convertible bond's conversion premium?
Joseph Moore is saving for an Australian vacation in three years. He estimates that he will need $5,300 to cover his airfare and all other expenses
A 12-year project is expected to generate annual sales of $162,565, variable costs of $35,285, and fixed costs of $35,250. The annual depreciation is $23,252 and the tax rate is 38 percent. What is the annual operating cash flow?
How much will you have if you wait 10 years before beginning to save and only make 33 payments into your retirement? account?
Computation of revenue on hedging of an investment and it must decide whether to use options or a money market hedge to hedge this position
You lend a friend $10,000, for which your friend will repay you $27,000 at the end of 5 years. What interest rate are you charing your "friend"?
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