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Acme Industries is considering building a plant that will have a value after two years. The cash flows from the plant will be $200 million following two good years, $150 million following one good and one bad year, and $100 million following two bad years. The initial cost of the plant is $140 million. After one year, however, the firm has options to change the plant’s capacity. Specifically, the firm has an expansion option to double the capacity by investing another $140 million. The firm also has a contraction option to halve the capacity by liquidating half of its assets to receive a salvage value of $60 million. Assume that the risk-free interest rate is 5% per year and that $1 invested in the market portfolio today will be worth either $1.3 (if the economy is good) or $0.8 (if the economy does poorly). What's the value of building the plant?
You calculate an average return of 10% and a standard deviation of 5%. Assuming the returns are normally distributed, what is the probability that the investment will yield a return of less than 5%?
How would I find the cost of a break even analysis for a gym and if it was reasonable for them to add a smart phone application?
The Fed funds rate is the rate that
Assume that the firm's Total Asset Turnover will average 1.0 in each of the five years and Equity Financing percentages will remain constant at 50 percent. The firm projects Reported Income Index values to be 0.85 each year.
A company has a beta of 0.50. If the market return is expected to be 12 percent and the risk-free rate is 5 percent, what is the company's required return?
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semi-annually. If you require an "effective" annual interest rate (not a nominal rate) of 10.59%, how much should you be willing to pay for the bond? Do..
Essex Biochemical co has $1,000 par value bond outstanding that pays 15 percent anual interest. The current yield to maturity on such bonds in the market is 17 percent. Compute the price of the bonds for these maturity dates:
How many U.S. dollars must be raised if payment is due today, is the dollar appreciating or depreciating against the yen? Explain - How many U.S. dollars must be raised if payment is due in 90 days?
Calculate the net operating cash flows in years 1, 2, and 3 and calculate the non-operating terminal year cash flow.
What is the value of a common stock if the firm's earnings and dividends are growing annually at 10%, the current dividend is $1.32, and investors require a 15% return on investment? What is the stock's rate of return if the market price of the stock..
You purchased one EAW, Inc. 6 percent coupon bond one year ago for $1,020. The bond makes annual payments and matures four years from now. You sell the bond today when the required return is 5 percent. The inflation rate was 2.8 percent over the past..
A machine costs $60 and requires $35 in maintenance for each year of its three year life. After three years, this machine will be replaced. If the machine belongs in a 30% CCA class and has no salvage value, what is the EAC? Assume a tax rate of 34% ..
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