1. How are share repurchases an alternative to dividends, and why might investors prefer them?
2. Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.238 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $4,656,000 in annual sales, with costs of $1,862,400. Required: If the tax rate is 34 percent, what is the OCF for this project?
3. 6 years ago, CTV issued $20 million bond at par. Assume this is the only bond that CTV has now. What is the market value of debt for CTV? cost of debt-6.1%, cost of common stock-11.88%, cost of preferred stock-7.50%, growth rate-5.21% par value of bond is $1,045. 7% coupon bond.