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You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10.5 million. Investment A will generate $2.03 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.55 million at the end of the first year and its revenues will grow at 2.5% per year for every year after that.
a. Which investment has the higher IRR?
b. Which investment has the higher NPV when the cost of capital is 6.2%
Computation of price of the bond and what price should the existing bond be traded at when the new five-year bond issued
Western Wood Product has 2 production sections: cutting and assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labor hours.
A project anticipates net cash flows of $10,000 at the end of year one, with such amount increasing at the expected 5 percent rate of inflation over the subsequent four years.
The Zambrano family purchased a house for $91,000. They paid $20,000 down and took out a thirty year mortgage for the balance at 9 percent.
Rodney Rogers, a recent business school graduate, plans to open a wholesale dairy products firm. The business will be completely financed with equity.
What external factors affect the optimal capital structure? What is the benefit of being at the optimal capital structure?
Barrett Corporations invests a large sum of money in R&D; as a result, it retains and reinvests all of its receiving. Barrett does not pay any dividends and it has no plans to pay dividends in the near future.
A ski resort plans to eventually add 5-new chairlifts. One lift costs $2 million, making slope costs another $1.3 million. The lift allows 300 additional skiers, but there are only forty days a year when the extra capacity will be required.
Suppose the capital-asset-pricing model holds. Based on the CAPM, what is the risk-free rate? What is the expected return on the market portfolio?
If the cost of common equity for the firm is 17.3% the cost of preferred stock is 10.9%, the beforetax cost of debt is 7.9%, and the firm's tax rate is 35%, what is the QM weighted cost of capital?
Explain what extent do different theories of financial markets recognize a distinction between risk and uncertainty
Determine how you plan to create an investment portfolio. What steps do you plan to undertake to create your portfolio? How do you plan to weight the portfolio? How do you plan to account for risk?
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