Start Discovering Solved Questions and Your Course Assignments
TextBooks Included
Active Tutors
Asked Questions
Answered Questions
Define the MM Proposition I without taxes, with corporate taxes.
Your firm's CEO has just learned about options and how your firm's equity can be viewed as an option.
Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5 percent bonds outstanding.
What is the maximum dollar amount of debt financing that can be used? What is the value of the firm at this debt level? What is the cost of this debt?
How would the equity value and the yield on the debt change if Fethe's managers were able to use risk management techniques to reduce its volatility.
A change in the Tax Code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends.
he life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,290 per year.
Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
How should environmental effects be considered when evaluating this, or any other, project?
If you were told that each project's cost of capital was 10 percent, which project should be selected?
What are the annual incremental cash flows that will be available to Ewert Exploration if it undertakes Plan B rather than Plan A?
Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant.
Can you think of some other capital budgeting situations where negative cash flows during or at the end of the project's life might lead to multiple IRRs?
What is the present value of costs of each alternative? Which method should be chosen?
If the two projects are independent and the cost of capital is 10 percent, which project or projects should the firm undertake?
From the Wall Street Journal, a website such as Yahoo! Finance, or some other source, obtain a current estimate of the risk-free rate .
By how much would the value of the company increase if it accepted the better project (plane)?
The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future.
Assume that Filkins' cost of capital is 14 percent. Should the firm replace its old knitting machine, and, if so, which new machine should it use?
Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
If you were told that each project's cost of capital was 12 percent, which project should be selected?
Now suppose all three firms have the same standard deviation of basic earning power (EBIT/Total assets).
What would the weighted average cost of capital be at the optimal capital structure?
Explain how net operating working capital is recovered at the end of a project's life, and why it is included in a capital budgeting analysis.
Carter Air Lines is now in the terminal year of a project. The equipment originally cost $20 million, of which 80 percent has been depreciated.