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Write out the decision tree and use decision tree analysis to calculate the expected NPV of this project including the option to continue.
Fethe's Funny Hats is considering selling trademarked curly orange-haired wigs for University of Tennessee football games.
Firms with relatively high nonfinancial fixed costs are said to have a high degree of what?
If a firm went from zero debt to successively higher levels of debt, why would you expect its stock price to first rise, then hit a peak.
Would the new situation expose the firm to more or less business risk than the old one?
What is the firm's WACC and total corporate value under each capital structure?
What is BEA's unlevered beta? Use market value D/S when unlevering. What are BEA's new beta and cost of equity if it has 40 percent debt?
Booth's fixed assets were used to only 50 percent of capacity during 2006, but its current assets were at their proper levels.
How large a sales increase can the company achieve without having to raise funds externally?
Total assets and accounts payable are proportional to sales and that relationship will be maintained.
Define the weighted average cost of capital, after-tax cost of debt.
Distinguish between beta (or market) risk, within-firm (or corporate) risk, and stand-alone risk for a potential project.
David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity.
Tunney Industries can issue perpetual preferred stock at a price of $50 a share. The issue is expected to pay a constant annual dividend of $3.80 a share.
Javits & Sons' common stock is currently trading at $30 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year.
Calculate the after-tax cost of debt under each of the conditions-Interest rate, 13 percent; tax rate, 0 percent.
What is a financial option? What is the single most important characteristic of an option?
The going rate of interest on new long-term debt, rd, is 10 percent, and this is the present yield to maturity on the bonds.
Growth is expected to be constant after 2008. The weighted average cost of capital is 11 percent.
What is the firm's component cost of debt for purposes of calculating the WACC?
If the firm's beta is 1.6, the risk-free rate is 9 percent, and the expected return on the market is 13 percent, what will be the firm's cost of equity.
The Bouchard Company's current EPS is $6.50. It was $4.42 5 years ago.
If investors require a 9 percent return, what rate of growth must be expected for Sidman?
To maintain the present capital structure, how much of the new investment must be financed by common equity?
The stock will be issued for $30 and the flotation cost is 10 percent of the issue proceeds.