8. Present value of an investment in equipment. (Tables needed.) Find the present value of an investment in equipment if it is expected to provide annual savings of $10,000 for 10 years and to have a resale value of $25,000 at the end of that period. Assume an interest rate of 9% and that savings are realized at year end.
Which of the three models (dividend growth, CAPM, or APT) is the best one for estimating the required rate of return (or discount rate) of Safeway? In your paper include discussion of the following issues: 1. Ease of use of these three models 2. Accuracy of each of these three models 3. How realistic the assumptions of e
Super Growth Corp. has decided to increase its dividend to $5 per share beginning next year. The firm's growth rate is expected to be 12.5% for the foreseeable future. Investors require a rate of return on the firm's stock of 18%. Utilize the Gordon Model to calculate the expected price of the firm's stock. a. $64 b. $75 c
Select one current event. Then, select three separate concepts / tools to analyze the current events in such a way that each concept or analysis will allow a financial decision maker to make an informed decision. Concepts can range from risk and return, capital structure considerations, ratio analysis, financial statement, val
Answer the attached questions with at least five sentences each, >>>thoroughly and in your own words<<< 1. Identify two key drivers to cash flow. How do these drivers impact corporate value? 2. Define market efficiency. 3. What are some of the ambiguities encountered in accounting on an accrual basis? 4. How
Classification of Derivatives for Accounting I. Speculative II. Fair value hedge III. Cash flow hedge IV. Foreign currency fair value hedge V. Foreign currency cash flow hedge VI. Foreign currency hedge of net investment in foreign operation VII Not a derivative Based on the above, what category
1. What are some problems associated with using the discounted cash flow method of valuation? 2. Beta measures risk. What are some other types of risk faced by investors?
If BEA Enterprise in ready to launch a new product. Depending upon the success of this product, BEA will have a value of either $100 million, $150 million, or $191 million, with each outcome being equally likely. The cash flows are unrelated to the state of the economy (i.e. risk from the project is diversifiable) so that the
13. Consider the following tax rates for 2008: Ordinary Income Rate: 35% Capital Gains Rate: 15% Dividend Rate: 15% The effective dividend tax rate for a one-year individual investor in 2008 is closest to: [Hint: T*d = [(Td - Tg) / (1 - Tg)] 20% 15% 35% 0% 14. Conside
1) other things held constant, which of the following alternatives would increase a company's cash flow for the current year? A) increase the number of years over which fixed assets are depreciated for tax purposes. B) pay down the accounts payable C) reduce the days sales outstanding without affecting sales or operatin
1. Having $200 in one year is equivalent to having what amount today? $218.08 $408.00 $192.31 $208.00 $800.00 2. Which would you prefer, $200 today or $200 in one year? Does your answer depend on when you need the money? Why or Why not? 3.What is the no-arbitrage price of
You work for the 3T company, which expects to earn at least 18% on its investments. You have to choose between two similar projects. Below is the cash information for each project. Your analysts predict that the inflation rate will be a stable 3% over the next seven years. Which of the two projects would you fund if the decision
Existing machine: Costs: 82,500, fully depreciated except for 7,500 salvage value. Operating costs: Maintenance: 67,500 Costs from alternatives (after five years, both machines have for tax purpose a zero salvage value): Machine 1 Purchase: 160,000 Operating costs: 45,000/ year Maintenance: 27,000 for the first th
True/False 1. The money market is usually thought of as dealing with long-term debt instruments issued by firms with excellent credit ratings. 2. For a firm to have its securities listed on an exchange, it must meet certain requirements. These usually include measures of profitability, size, market value, and
Problem 1: Botox Facial Care had earnings after taxes of $280,000 in 2006 with 200,000 shares of stock outstanding. The stock price was $30.80. In 2007, earnings after taxes increased to $320,000 with the same 200,000 shares outstanding. The stock price was $40.00. Compute earnings per share and the P/E ratio for 20
You use constant growth dividend valuation model (i.e. Gordon model) to find the current market price of a stock. The required rate of return for this stock increases from 15 to 17 percent combined with an increase in the growth rate from 7 to 9 percent. Given these changes, show whether the price of the stock will rise or fall
Delta Industries has just issued callable ten-year, 8% coupon bonds with semi-annual coupon payments. The bonds can be called at par in four years or anytime thereafter on a coupon payment date. The current bond price is $1000. For an investment today in these bonds (assuming no transaction costs): a. What is an investor's
Please see and use the attached spreadsheet! Thank you! Intel Corporation is a leading manufacturer of semiconductor chips. The firm was incorporated in 1968 in Santa Clara, California, and represents one of the greatest success stories of the computer age. Although Intel continues to grow, the industry in which i
Intel Corp is a leading manufacturer of semiconductor chips. Although Intel continues to grow, the industry in which it operates has matured so there is some question whether the firm should be evaluated as a high-growth company or stable growth company. See spreadsheet to answer the following a) Is Intel's current stock
Problem: 5.Calculate the effective duration of a bond to a 100 basis point change in interest rates with a 6-1/4 coupon, 10-years remaining to maturity, and an asking quote of 110.7811 (decimal, not 32nds). Calculate the effective convexity to a 100 basis point change of the bond in Question 5. Calculate the total perce
Could you please give your comment opinion on the attached articles by Graham Field? 10 Commom Mistakes in Working Capital Management
The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par value. Bond Proceeds per bond Size of issue Ini
What is the present value of all future earnings if the interest rate is 8% ("Hot" Internet Company)?
You are running a hot internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $1,000,000. What is the present
The case is about cost of capital. I do not have idea how to solve it, which formulas to use... I do not understand anything. I do not know where which formulas to use. Could you explain in each question which formulas should I use. I don't ask for doing this assignment for me, I just need some help and some more explanation to
Cash Flow Estimation/Risk Analysis A) Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included. Real Options B) In general, do timing options make it more or less likely that a project will be accepted today? Capital Budgeting C) Wh
Pick a company that pays dividends, then calculate the expected growth rate of your company using the CAPM. Once this task is complete, calculate the expected growth rate using the Constant Growth (or Gordon Growth) Model. You may need additional information to complete this exercise. You can find a stock's beta and grow
7. The Hopewell Pharmaceutical Company's balance sheet and income statement for last year are as follows: Balance Sheet (in Millions of Dollars) Assets Liabilities and Equity Cash and marketable securities $1,100 Accounts payable $900 Accounts receivable 1,300 Accrued liabilities 300 Inventories
The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines.
1. (Ignore income taxes in this problem) The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 8 years. The company uses a discount rate of 10% in its capital budgeting. The net present value
You are heading up your firm's capital investment evaluation efforts. Currently, the capital investment group is deliberating over the three investment proposals below. They are not mutually exclusive. Your company uses a 12% annual rate to discount cash flows for NPV. The following table presents the costs of each investmen
It is expected to produce US$3.5 million in revenue annually the first year and grow 5% per year thereafter. The project will increase operating expenses by US$1.75 million the first year and grow at 3% annually per year thereafter. The project cost US$6 million in capital, and the capital will be depreciated on a straight