Last year, Stewart-Stern Inc. reported $11,250 of sales, $4,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds outstanding that carry a 6.5% interest rate, and its federal-plus-state income tax..
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Consider a three-period ( t = 0,1, 2, 3 ) binomial option pricing model. There are 3-period put options on the stock. The values of the underlying variables are S = $50, n = 3, K = $48, u =1.1, d = 0.9, r =1.02 (a) what is the risk-neutral probabilit..
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Jesse, age 20, plans to save $3,000 a year for 10 years starting at age 24. Alicia, age 20, plans to save $3,000 a year for 10 years starting at age 31. Both expect to earn the same rate of return. Which plan is better given that neither of these ind..
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Well researched data and solid assumptions are at the heart of good budgets. How should a Manager go about creating assumptions for their budget that will ensure it gets approved? What should a Manager look for when evaluating the validity of assumpt..
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Calculating OCF. Hammett, Inc., has sales of $34,630, costs of $10,340, depreciation expense of $2,520, and interest expense of $1,750. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
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Modified Internal Rate of Return (MIRR) Adolphus Logistics has a weighted average cost of capital of 10 percent. The company is considering a project with the following expected cash flows: Year Project Cash Flow 0 –$611 million 1 372 million 2 235 m..
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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
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You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $19,500 to purchase and which will have OCF of –$2,300 annually throughout the vehicle’s expected life of three years as..
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Suppose you sell a fixed asset for $50,000 when its book value is $60,000. If your company's marginal tax rate is 40%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
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There are two parties in any lease contract - Lessee and the lessor. To a lessor, a lease analysis involves a capital digesting analysis of the property or equipment to be leased. The lessor's decision is either to purchase and lease-out the asset, o..
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Suppose you buy a 9.4 percent coupon bond today for $1,120. The bond has 5 years to maturity. What rate of return do you expect to earn on your investment? Two years from now, the YTM on your bond has increased by 2 percent, and you decide to sell. W..
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Based on the following ex-post data, what is the beta of the portfolio if the portfolio is well-diversified? Standard deviation of the portfolio=.22 Standard deviation of the market portfolio=.10
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