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The Discounted Cash Flows Model

Weight Average Cost - The Rondo Company

Requirement A and B Capital Structure Value Weights Cost of Capital Income Tax After- tax Cost of Capital Weighted Average Cost of Capital Bank loan 7,500,000 17.26% 6.00% 40% 3.60% 0.62% Mortgage bond 5,000,000 11.50% 9.00% 40% 5.40% 0.62% Common stock 30,960,000 71.24% 17.01% 17.01% 12.12% Total 43,460,000

Payback and Discount payback

Please see the attached file for details. Payback and Discounted Payback A. A company is determining whether or not to invest in a project of limited duration. The cash flows that correspond to the project are as follows: Annual Cash Flows Year 1 $400,000 Year 2 $400,000 Year 3 $400,000 Year 4 $400,000

Risk Identification and Measuerment Paper

The riskiness of an investment project is defined as the variability of its cash flows. While evaluating the level of risk, the Chief Financial Officer (CFO) of an organization should assume that the present value of cash is greater than the company's future value. The level of risk is directly proportional to possible profitab

Finance - The Rondo Company Case Analysis

Http:// A. Prepare a valuation of Rondo's securities using the methods demonstrated. You should value the existing mortgage bond, the required rate of returns on equity securities using the CAPM model and the theoretical com

Dividend Discount Model - Ameritech Corporation

2. Ameritech Corporation paid dividends per share of $3.56 in 1992, and dividends are expected to grow 5.5% a year forever. The stock has a beta of 0.90, and the Treasury bond rate is 6.25%. (Risk premium is 5.5%) a. What is the value per share, using the Gordon growth model? b. The stock

Arbitrage and Value of Money Problem

Please see the attachment. Suppose your firm receives a $5 million order on the last day of the year. You fill the order with $2million worth of inventory. Customer picks up entire order the same day and pays $1million upfront in cash; you also issue a bill for the customer to pay the remaining balance of $4million within 30 da

Roles of a Finance Department

(1) What role does a finance department play in valuing business opportunities (both internal such as projects and external such as acquisitions)? (2) How might a division manager form a good working relationship with and utilize the talents of the CFO, treasurer and controller for this assignment to include in-text citations an

Interest Rate to Fund a College Education in 18 Years

1) You expect your newly born child to attend college in 18 years. You have $12,000 to set aside for that purpose. You also expect that the total cost of college education to be $100,000 by that time. Calculate the interest rate at which you have to invest today to achieve your goal. SHOW CALCULATIONS AND WHAT NUMBERS GO IN

Present Value, Amortization with Equal Principal Payments,

Your company will generate $65,000 in cash flow each year for the next 10 years from a new information database. The computer system needed to set up the database costs $307,000. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) 1) If you can borrow the money to buy the computer system at 8.25 perce

Stock Valuation: Declining and Constant Growth Stock

PREFERRED STOCK VALUATION Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return? PREFERRED STOCK VALUATION Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently y

Calculating a Present Value Problem

Please help answer the following problems. A. Find the present values of the following cash flow streams at 8% compounded annually. 0 1 2 3 4 5 ------------------------------------------------ Stream A $0 $100 $400 $400 $400 $300 Stream B $0 $300 $400 $400

Financial Management: IBM Stock Analysis

NOTE: Please follow the instructions; I must use the specific instructions that I attached as well as "current market data." MS Word document has actual assignment. MS PowerPoint has specific instructions: note the updated figure I placed on slide #1 for 10 year treasury is current (9 sep 09) PDF has IBM's stock data you are

JP Morgan Chase Stock

Provide a buy or sell recommendation and an estimated price target. Should include the following 5 sections: 1) Background of the company with a life cycle analysis 2) Analysis of Return on Equity 3) The company's future growth rate of earnings 4) Analysis of its required rate of return using the CAPM 5) Intrinsic v

Interest Rate Swap for Fixed Payment Side

There is a 2 year swap contract (fix to float) signed on the swap rate of 5%; Interest will be exchanged every half year. Now suppose the swap contract start from now on and the current zero rates are in the table below. Calculate how much the swap value right now for the fixed payment side. Maturity(Yrs) Zero Rate(Continuo

Present Value of Expected Future Savings

At the end of 2005, Uma Corporation was considering undertaking a major long-term project in an effort to remain competitive in its industry. The production and sales departments determined the potential annual cash flow savings that could accrue to he firm if it acts soon. Specifically, they estimate that a mixed stream of fu

Finance MCQ: investment banker, zero-growth, treasury stock, stock value

1.________ is hired by a firm to find prospective buyers for its new stock or bond issue. 1. An investment banker 2. A securities analyst 3. A trust officer 4. A commercial loan officer 2. The ________ is utilized to value preferred stock. 1. variable growth model 2. Gordon model 3. constant growth model 4. zero

TF: future cash flows, forecasts, market structure, discounting methods, WACC

Answer true or false to each question with one or two sentences of explanation for each. 1. The greater the uncertainty of the future, the greater the need for alternative scenarios in projecting future cash flows. 2. The reliability of continuing value estimates is greater than of explicit forecast estimates. 3. Compet

Computer Concepts Merger analysis

Please answer questions #2 through #7 and 11-12 at the end of the case. Please use the attached excel spreadsheet to support the analysis. Please show all of your supporting works in excel.


1.Consider the following returns and yields: U.S. T-bill = 8%, 5-year U.S. T-note = 7%, IBM common stock = 15%, IBM AAA Corporate Bond = 12% and 10-year U.S. T-bond = 6%. Based on this information, the shape of the yield curve is 1. normal. 2. downward sloping. 3. upward sloping. 4. flat. 2.If a bond pays

Forecasting, Interest Rate, Bonds, Market Securities

2. Government economists have forecasted one-year T-bill rates for the following five years, as follows: Year 1-year rate (%) 1 4.25 2 5.15 3 5.50 4 6.25 5 7.10 You have a liquidity premium of 0.25% for the next two years and 0.50% thereafter. Would you be willing to purchase a four year T-bond at a 5.75% inter