Showing 1009–1017 of 1965 results
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Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000
$1.00Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The impact of the new machinery will be felt in the additional annual cash flows of $375,000 over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be accepted?
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A thirty- year U. S. Treasury bond has a 4.0 percent interest rate.
$2.00A thirty- year U. S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten- year Treasury bond has an interest rate of 2.5 percent. A maturity risk premium is estimated to be 0.2 percentage points for the longer maturity bond. Investors expect inflation to average 1.5 percentage points over the next ten years.
- Estimate the expected real rate of return on the ten- year U. S. Treasury bond.
- If the real rate of return is expected to be the same for the thirty- year bond as for the ten- year bond, estimate the average annual inflation rate expected by investors over the life of the thirty- year bond.
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The Bravo Company just paid an annual dividend of $4.00 per share…
$2.00The Bravo Company just paid an annual dividend of $4.00 per share. Due to a need to conserve cash, the dividend in one year will be cut to zero. Dividends per share are forecasted to be $1.50 in two years, $2.50 in three years, and $3.50 in four years. After four years, dividends are expected to grow at a constant rate forever. Investors in Bravo Company require a return of 12%. The current market price of Bravo’s stock is $30.66 per share.
Determine the constant growth rate in dividends after four years that would justify the current market price.
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Central City Construction (CCC) needs $3 million of assets to get started…
$3.00Central City Construction (CCC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 20%. CCC will own no securities, so all of its income will be operating income. If it chooses to, CCC can finance up to 40% of its assets with debt, which will have an 7% interest rate.
Assuming a 40% tax rate on all taxable income, what is the difference between CCC’s expected ROE if it finances with 40% debt versus its expected ROE if it finances entirely with common stock? Round your answer to two decimal places
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An investment project has annual cash inflows of $4,900…
$5.00An investment project has annual cash inflows of $4,900, $3,400, $4,600, and $3,800, and a discount rate of 13 percent.
- a) What is the discounted payback period for these cash flows if the initial cost is $5,200?
- b) What is the discounted payback period for these cash flows if the initial cost is $7,300?
- c) What is the discounted payback period for these cash flows if the initial cost is $10,300?
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The Sopchoppy Motorcycle Company is considering an investment…
$10.00The Sopchoppy Motorcycle Company is considering an investment of $600,000 in a new motorcycle. They expect to increase sales in each of the next three years by $400,000, while increasing expenses by $200,000 each year. They expect that they can carve out a niche in the marketplace for this new motorcycle for three years, after which they intend to cease production on this motorcycle and sell the manu- facturing equipment for $200,000. Assume the equipment is depreci- ated at the rate of $200,000 each year. Sopchoppy’s tax rate is 40%.
- What are the net cash flows for each year of the motorcycle’s three-year life?
- What is the net present value of the investment if the cost of cap- ital is 10%?
- What is the net present value of the motorcycle investment if the cost of capital is 5%?
- What is the profitability index of this investment if the cost of capital is 5%?
- What is the payback period of the investment?
- What is the discounted payback period of the investment if the cost of capital is 5%?
- What is the internal rate of return of the investment?
- What is the modified internal rate of return of the motorcycle investment if the cash flows are reinvested at 5%?
- If the cost of capital is 10%, should Sopchoppy invest in this motorcycle?
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U.S. investors have $1,000,000 to invest
$2.00Assume the following information:
U.S. investors have $1,000,000 to invest
1-year deposit rate offered on U.S. dollars = 12%
1-year deposit rate offered on Singapore dollars= 10%
1-year forward rate of Singapore dollars = $0.412
Spot rate of Singapore dollar = $0.400Should a U.S. based investor Covered interest arbitrage and invest in Singapore? Answer
- Yes because the return would be 14.23%
- No because the return would be 14.23%
- Yes because the return would be 13.3%
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Gateway Communications is considering a project…
$2.00Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. The tax rate is 35 percent. The project will require $45,000 of inventory which will be recouped when the project ends. Should this project be implemented if the firm requires a 14 percent rate of return? Why or why not?
A. No; The NPV is -$172,937.49.
B. No; The NPV is -$87,820.48.
C. Yes; The NPV is $251,860.34
D. Yes; The NPV is $466,940.57
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Margerit is reviewing a project with projected sales of 1,500 units…
$1.00Margerit is reviewing a project with projected sales of 1,500 units a year, a cash flow of $40 a unit and a three year project life. The initial cost of the project is $95,000. The relevant discount rate is 15%. Margerit has the option to abandon the project after one year at which time she feels she could sell the project for $60,000. At what level of sales should she be willing to abandon the project?