1. Naylor's is an all-equity firm with 60,000 shares of stock outstanding at a market price of $50 a share. The company has earnings before interest and taxes of $102,000. Naylor's has decided to issue $825,000 of debt at 7.5 percent and use the proceeds to repurchase shares. Currently, you own 500 shares of Naylor's stock. How many shares of this stock will you continue to own if you unlever this position? Assume you can loan out funds at 7.5 percent interest. Ignore taxes.
322.2 shares
350.0 shares
362.5 shares
425.5 shares
502.8 shares
2. The internal rate of return of a capital investment
a. changes when the cost of capital changes.
b. must exceed the project cost of capital to make the investment financially acceptable.
c. measures the dollar profitability of a project.
d. must be less than the project cost of capital to make the investment financially acceptable.
e. measures the length of time that it takes a business to recover its initial investment in the project.
Question: Chris’s Outdoor Furniture, Inc., has net cash flows from operating activities for the last year...
Chris’s Outdoor Furniture, Inc., has net cash flows from operating activities for the last year of $410 million. The income statement shows that net income is $385 million and depreciation expense is $51 million. During the year, the change in inventory on the balance sheet was $41 million, change in accrued wages and taxes was $21 million, and change in accounts payable was $32 million. At the beginning of the year, the balance of accounts receivable was $51 million. Calculate the end-of-year balance for accounts receivable.