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Using the appropriate table from the Chapter 12 Appendices, record the present-value factor at 10% for each year and compute the present-value cost of owning and the present value of leasing. Which alternative is more desirable at this interest rate? Do you think your answer would change if the interest rate was 6% instead of 10%? Cost of Owning: Anywhere Clinic—Comparative Present Value For-Profit Cost of Owning: Year 0 Year 1 Year 2 Net Cash Flow (48,750) 2,500 2,500 Present-value factor Present-value answers 5 Present-value cost of owning 5 Cost of Leasing: Anywhere Clinic—Comparative Present Value Line For-Profit Cost # of Leasing: Year 0 Year 1 Year 2 19 Net Cash Flow (8,250) (8,250) (8,250) 20 Present-value factor 21 Present-value answers 5 22 Present-value cost of leasing 5
A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and 15 percent respectively. The standard deviations of these stocks are 10% and 18% and the correlation coefficient between ..
At your age (assume 20) you can assume that you will live to be 100. If you graduate at 23 and start to work, you can expect to work for 47 years, until age 70. Ignoring inflation in all calculations, how much will you need to have saved at retiremen..
You Plan to borrow $50,000 from the bank to pay for inventory for a gift shop you just opened. The bank offers to lend you the money at 8% annual interest. The funds will be needed for 6 months. Calculate the effective rate of interest on the loan.
Ted Tech Inc. is offering a 10% stock dividend. The firm currently has 200,000 shares outstanding and after-tax profits of $800,000. The current price of the stock is $48. a. Calculate the new earnings per share. b. What is the original price/earning..
The Sharpe Co. just paid a dividend of $2.05 per share of stock. Its target payout ratio is 40 percent. The company expects to have earnings per share of $6.20 one year from now. If the adjustment rate is .3 as defend in the Lintner model, what is th..
Bruce & Co. expects its EBIT to be $75,000 every year forever. The company can borrow at 12 percent. The company currently has no debt, its cost of equity is 15 percent, and the tax rate is 35 percent. What is the cost of equity after recapitalizatio..
The Beach House has sales of $790,000 and a profit margin of 7 percent. The annual depreciation expense is $80,000. What is the amount of the operating cash flow if the company has no long-term debt?
saven travel corporation is considering several investment opportunities in order to diversify its operations. mr.
Sometimes the management of a target firm fights a takeover attempt even when that attempt appears to be in the best interest of the shareholders. Why would management take this stance? What tools would management use to mount such a defense?
Explain why the present value of a cash flow stream, and the asset associated therewith; fluctuate in value with the level of interest rates in the capital markets.
Perry Bell paid $6,438 of state and local property tax this year. Compute the after-tax cost of these payments assuming: a. Perry doesn't itemize deductions on his Form 1040. b. Perry itemizes deductions, has a 33 percent marginal tax rate on regular..
A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon sells for $985. What is its yield to maturity? You are planning to make annual deposits of $4,320 into a retirement account that pays 8 percent interest compounded monthly. H..
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