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Aftertax cost in percent of the new loan

To raise money to finance the capital budget projects you've been evaluating, your firm plans to borrow money at an interest rate of 14%, before-tax. If your firm's effective tax rate is 40%, what is the aftertax cost in percent of the new loan?

Pro forma financial statements..

If you constructed a set of pro forma financial statements for 2005 and found that projected Total Assets exceeded projected Total Liabilities and Equity by $11,250, you would know that: a. your forecasting method is inaccurate b. your forecasting assumptions or calculations must be in error, because projected Assets

Gross Profit for 2005

Consider the following condensed Income Statement: 2004 Sales $8,000,000 COGS 6,500,000 Gross Profit 1,500,000 Sales growth in 2005 is expected to be 15% If COGS is assumed to vary directly with sales, then Gross Profit for 2005 will be:

Finance Concepts: After-Tax Yields On Investments

Bernie and Pam Britten are a young married couple beginning careers and establishing a household. They will each make about $50,000 next year and will have accumulated about $40,000 to invest. They now rent an apartment but are considering purchasing a condominium for $100,000. If they do, a down payment of $10,000 will be requi

Furniture Store Addition of Appliances for Sale

Please help with the following problem. A large furniture store is considering adding appliances to its sales. Which of the following should be considered to purchase the appliance inventory? 1. utilizing the credit offered by a supplier to purchase the appliance inventory 2. benefiting from increased furniture sales to

The new mid range spa will sell for $8,000. What is the value of the erosion?

A Spa Company currently sells 300 Class A spas, 450 Class C Spas and 200 deluxe model spas each year. The firm is considering adding a mid class spa and expects that if it does it can sell 375 of them. However if the new spa is added Class A sales are expected to decline to 225 units while the Class C Sales are expected to de

How much will you pay for a share of stock today?

A Store paid an annual dividend of $11.15 per share last month. Today the company announced that future dividends will be increasing by 2.6 % annually. If you require a 12% rate of return how much will you pay to purchase one share of stock today?

Calculate a Bid Price to supply 100 million stamps per year to the USPS

Please calculate the bid price that should be submitted from the following information: If a project is to supply 100 million postage stamps per year to the USPS for the next five years. You have land available that cost $2,400,000 5 years ago. If it were sold today, it would net $2,700,000 after tax. The land could be sold f

Scenario Three: Cost Club

I need help preparing an outline for the below information. You are a assistant manager of Human Resources for this regional office of Cost Club. Briefing the Senior Regional Staff Your boss, Pat, sends you this e-mail that defines your new assignment: Briefing the Senior Regional Staff As you know, we will hav

Portfolio Market Risk for Portfolio AB

Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20%. Portfolio AB was created by investing in a combination of Stocks A and B. Portfolio AB has a beta of 1.25 and a standard deviation of 18%. Which of the following statements is CORRECT? Question 12 answers

Capital Budgeting

Identify a potential capital project for Apple, Inc., describe the project and explain the problems they might encounter getting the funding to see it through.

Risks and Rates of Returns: Problems 8-7, 8-10, 8-12

8-7 Suppose you are the money manager of a 4 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A 400,000 1.50 B 600,000 (0.50) C 1 million 1.25 D

Financial Options and cost of capital: 7 multiple choice questions

1. WWW Servers just paid a dividend of D0 = $1.00. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on WWW's stock is 9.00%. What is the best estimate of the stock's current intrinsic value? a. $31.50 b. $32.31

Cost of Capital and Investment Costs

If the cost of capital is 9 percent and an investment costs $56,000, should you make this investment if the estimated cash flows are $5,000 for years 1 through 3, $10,000 for years 4 through 6, and $15,000 for years 7 through 10?

Calculating the Break-Even Point

In very general terms, how do we calculate breakeven? How do we have to adjust our approach to accommodate breakeven for a firm selling multiple products?

Operating Leverage for start up business

If you were running a start up business would you prefer to have a business with high or low operating leverage? Alternatively, if you were running a well-established profitable business, which would you prefer? Support your view.

Bonds: Calculate the value of a $1,000 bond

Calculate the value of a $1,000 bond which has 10 years until maturity and pays quarterly interest at an annual coupon rate of 12%. The required return on similar-risk bonds is 20%. A. $845.66 B $2,201.08 C $835.45 D $656.77

Airline Costs for Promotional Campaign

An airline is considering a new promotional campaign to attract college students by offering them the right to fly stand-by at low prices when seats are not otherwise filled. List several examples of relevant and irrelevant costs from the airlineâ??s point of view

EAR for two banks, make a recommendation to the best option

Calculate the EAR for two banks, make a recommendation to the best option and compute payments for the selected loan. Task 1: Assessing loan options for AirJet Best Parts, Inc. The company needs to finance $8,000,000 for a new factory in Mexico. The funds will be obtained through a commercial loan and by issuing corporate

Present Value and Stream of Cash Flows

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 9%? Yr. Amount 1-5 $10,000/yr. 6-10 $16,000/yr. A. $10,972 B. $13,252 C. $79,348 D. $141,588

Financial Relationships

See the attached file. Financial Relationships Using the Dell and Delta's Financial Statements Paper, write a summary (300 words) comparing Delta and Dell most recent fiscal years based upon the following: A. Briefly discuss the inter-relationships noted among the data provided by each of the statements. http://finan

External financing to finance a sales increase

Rodeo Supply Company is planning to increase its sales by 20% next year. The sales increase will require a total additional investment in receivables, inventory, and fixed assets of $750,000. Increases in liabilities such as accounts payable and other accruals will supply $175,000 of financing. Rodeo also expects total profits o

Wealth Creation for Employees

Many firms have encouraged their employees to own stock in the company they work for. How would you explain to the employee the importance of his job in increasing the stock price? Assume that this employee is an operations person meeting the customer.

effects of compounding

The Wintergreens are planning ahead for their son's education. He is eight years old now and will start college in 10 years. The couple can deposit $35,000 today with one of the three local banks. Bank A pays 8.25% with annual compounding; Bank B pays 8.125% with quarterly compounding; and Bank C pays 8% with monthly compoundi

The Capitol Asset Pricing Model

Using Yahoo! Finance find the value of beta for your reference company (Apple, INC.) a. What is the estimated beta coefficient of your company? What does this beta mean in terms of your choice to include this company in your overall portfolio? b. Given the beta of your company, the present yield to maturity on U.S. gov

Equity Futures

One specialized type of security is called an equity futures. This is a contract that guarantees you a share of a particular company to be delivered to you not today, but sometime in the future, at a price that is determined by the market right now. This price is usually called the futures price of the stock (note - the term is

Different methods to value stock for Larry, Moe and Curley

Larry, Moe, and Curley are brothers. They're all serious investors, but each has a different approach to valuing stocks. Larry, the oldest, likes to use a 1-year holding period to value common shares. Moe, the middle brother, likes to use multiyear holding periods. Curley, the youngest of the three, prefers the dividend valuatio

Hartford Corporation: When is the optimal time to abandon the asset?

An asset costs $100,000 and will generate cash benefits of $30,000 at the end of each year for 5 years for Hartford Corporation. Salvage value are $50,000, $40,000, and $0 at the end of year 3, year 4, and year 5 respectively. The required return is 10%. Assuming that this asset can be replicated, when is the optimal time to aba