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The Indian subsidiary of BDC, a US multinational, has the opportunity to invest in one of two mutually exclusive machines. Both machines can produce the same product for the Indian market. Machine A has a life of 9 years, costs 120 million Indian Rupees (IRP) and will produce after-tax inflows of 2.5 million IRP per year at the end of each year. Machine B has a life of 7 years, costs 150 million and will produce after-tax inflows of 3.5 million IRP per year at the end of each year. Assuming the machines can be replaced indefinitely at constant prices, which machine should BCD choose? Assume a cost of capital of 12%. The current spot rate is 0.013 US$/IRP.
How much does she needs to place in saving account today that earns 5.13% per year (compounded annually) to accumulate this amount?
Assume that as it is may 15, 2015, and the government of Canada has just issued bonds with a may 2020 maturity, $1000 par value, and a 5% coupon rate with semi-annual coupons. The first coupon payment will be paid on November 15, 2015.
Purpose of the discussion question is to allow you as the student/learner to demonstrate your understanding of the chapter's key learning points and how you might apply them in given situation.
Based on your analysis, will Northland Industries still be balance sheet insolvent in Year 3 under scenario 1? If this trend continues, would you describe Northland's financial distress as a temporary or a permanent problem?
Record the following transactions in the appropriate books of original entry and show how they will be posted. Assume invoice numbers, folio number, etc.
What are three key facts about the term structure?
Flotation costs are expected to be 5 per cent; these costs can be amortized for tax purpose during 8 years at a uniform rate. The corporate tax rate is 35 per cent. Determine the costs of preference shares from the perspective of the subsidiary
Computation of value of bond and Ccalculate the expected return on the stock of Mitro Corporation
Impact of Interest Rates : - How are the interest rate, the required rate of return on a stock, and the valuation of a stock related?
Marie Corp. has $1400 in debt outstanding and $2900 in common stock (both amounts are market values). Its marginal tax rate is 35%. Marie's semiannual bonds have a YTM of 8.6%. The current stock price is $47. Next year's dividend is expected to be..
why do some investors prefer high-dividend-paying stocks while other investors prefer stocks that pay low or
What would a fully-taxable corporate bond have to yield in order to produce the same after-tax return as the 5% municipal bond? Show work. Express your answer as a percentage rounded to two decimal places.
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