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Calculate the amount of John's payment over the life of his loan. Compare these findings if he would have taken out a fix rate loan for the same period at 6.5%. Which do you think is the better deal
What is Dozier"s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.)
You have accumulated data on three stocks (see below). You have decided to use the information on these stocks to form an index. You want to find the average earned rate of return for 2011 on your i
Its profit margin on sales is 6%, and 40% of earnings will be paid out as dividends. What were Bertin"s total long-term debt and total liabilities in 2010?
How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate?
Gomez Electronics needs to arrange financing for its expansion program. Bank A offers to lend Gomez the required funds on a loan in which interest must be paid at the end of each month, and the stat
The after tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter"s additional funds needed for the coming year.
Suppose a firm makes the policy changes listed below. If a change means that external, non spontaneous financial requirements (AFN) will increase.
A relatively young firm has capital components valued at book and market and market component costs as follows. No new securities have been issued since the firm originally capitalized.
What would the depreciation expense be each year under each method? Which depreciation method would produce the higher NPV, and how much higher would it be?
What is meant by an "agency cost" or "agency problem"? Do these interfere with shareholder wealth maximization? Why? What mechanisms minimize these costs/problems? Are executive compensation contrac
It has zero salvage value. The firm"s WACC is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
What is the initial investment outlay? The company spent and expensed $50,000 on research related to the project last year. Would this change your answer? Explain.
What is your optimal strategy if you can borrow or lend at 12 percent and are prepared to tolerate a standard deviation of 25 percent? What is the maximum expected return that you can achieve?
Calculate expected rates of return on the following stocks. The risk-free interest rate is 7%. "a. A stock whose return is uncorrelated with all three factors.
There is no increased working capital need due to this new technology, and no value of the machine/technology after 10 years. What is the NPV of investing in the new technology?
Given this additional information, does using decision tree analysis indicate that it makes sense to purchase the paper company?
Your friend is considering buying a patio heater for her pub. She thinks that she can extend her patio season by several weeks and make more money. The patio heater costs $2000 but will increase bee
There is a 10 percent chance that the cash flows will be $2.2 million a year for 4 years. Assume that all cash flows are discounted at 10 percent.If the company chooses to drill today, what is th
Which of the following events are likely to increase the market value of a call option on a common stock? Explain. An increase in the stock"s price.
If a company has an option to abandon a project, would this tend to make the company more or less likely to accept the project today?
Given the following statement, please indicate whether it is true or false, and why: "An increase in the average payment period will result in an increase in the operating cycle and in the cash conv
Summer Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
How much bank financing is needed to eliminate the past-due accounts payable? Would you as a bank loan officer make the loan? Why or why not?
Thus becoming 35 days past due-without a penalty because of its suppliers" current excess capacity problems. What is the effective, or equivalent, annual cost of the trade credit?