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Determining Productivity and Wages: Example Problem

A advertising employee for Tires R US has the following. Weekly wage package is W = 1,000 + .5Q, where Q is her dollar volume of sales. Productivity is Q = 200e + u, where e denotes her hours of effort and u is a random variable with mean 0. If he works an additional hour, the expected value of his wages rises by:

Expected return of equity

Hardmon Enterprises is currently an all-equity firm with an expected return of 12%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. a. Suppose Hardmon borrows to the point that its debt-equity ratio is 0.50. With this amount of debt, the debt cost of capital is 6%. What

IRR & NPV

Consider this project with an interest rate return of 13.1 percent. Should you except or reject this project if the discount rate is 12 percent? Year Cash Flow 0 +$100 1 - 60 2 - 60

Calculating the NPV and IRR of a Project

Please help with the following problem: Your company is considering investing in a new plant. The initial investment is $220 million, obtainable at the end of the plant's useful life in ten years. Your company uses straight line depreciation (seven years). The net income from the project is expected to be $28 million per y

Enterprise value / value of equity

At the end of 2006, Blue Light, Inc. has net debt of $740 million and forecasts its cash flows (in millions) as: 2007 2008 2009 Cash flow from operations $1,400 $1,500 $1,750 Cash investment $1,000 $1,100 $1,300 The free cash flow wi

Solution to "Stock valuation" question

How much are you willing to pay for one share of Delphia stock if the company just paid a $1.34 annual dividend, the dividends increase by 2.8% annually, and you require a 14% rate of return? a) $9.84 b) $11.96 c) $12.30 d) $12.99 e) $13.61 Please explain!!!

Present value

What is the present value of $10,000 received. 1) 12 years from today when the interest rate is 4% per year? 2) 20 years from today when the interest rate is 8% per year? 3) 6 years from today when the itnerest rate is 2% per year?

Cash flow and the net present value

You are asked to analyse the following project: Initial investment: Equipment: $3,500,000 Initial net Working capital 10% of first year sales Operating results Year 1 Year 2 Year 3 Year 4 Year 5 $4,000,000 $5,000,000 $5,000,000 $5,500,000 $5,000,000 Variable costs: 60% of sale

Estimating the price of a common stock: Example problem

You are considering the purchase of a common stock that paid a dividend of $1.00 yesterday. You expect this stock to have a growth rate of 20% for the next 3 years, resulting in dividends of: D1 = $1.20 D2 = $1.44 D3 = 1.73 The long run normal growth rate after year 3 is expected to be 8% (that is,a constant growth rate

Alice Bates: Capital Budgeting

Alice Bates needs to reduce prices to her companies operating system software since its getting strong competition from a number of competitors. If she institutes a 30% discount she can probably increase next year's sales 25%. But if she reduces the price 60%, she can get it installed on notebook computers which is expected to i

Stock Prices

If a corporation pays annual dividends of $5. If the stock price can be purchased for $40.00 at the end of year 0, what price will the stock be worth at the end of year 4 to earn an 8% return over the 4 years.

Help with balance sheet, I really need help

Complete the following balance sheet for the Range Company using the following information: Debt to Assets = 60 percent Quick Ratio = 1.1 Asset Turnover = 5x Fixed Asset Turnover = 12.037x Current Ratio = 2 Average Collection Period = 16.837 days Cash Current Liabilities ______ Receivables ______

T-Bill/Equity beta-Weighted average cost of capital

ClearDebt Inc., is a firm with all-equity financing. Its equity beta is .80. The Treasury bill rate is 4 percent, and the market risk premium is expected to be 10 percent. What is ClearDebt's asset beta? What is ClearDebt's weighted-average cost of capital? The firm is exempt from paying taxes. I have several problems like th

Year end price of stock

A share of stock with a beta of .75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4 percent, and the market risk premium is 7 percent. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year?

CVP and Financial Statements

Procter & Gamble Company is a Cincinnati-based company that produces household products under brand names such as Gillette, Bounty, Crest, Folgers, and Tide. The company's 2006 income statement showed the following (in millions): Net sales $68,222 Costs of products sold 33,125 Selling, general, and administrative expense 21

A) The after-tax weighted average cost of capital (WACC) is given by: b) If a firm borrows $50 million for one year at an interest rate of 9%, what is the present value of the interest tax shield? c) If a firm permanently borrows $100 million at an interest rate of 8%, what is the present value of the interest tax shield?

23a.The after-tax weighted average cost of capital (WACC) is given by: (Corporate tax rate = TC) A. WACC = (rD)(D/V) + (rE)(E/V) B. WACC = (rD)(D/V) + [(rE)(E/V)/(1 - TC)] C. WACC = [(rD)(D/V) + (rE)(E/V)]/(1 - TC) D. WACC = (rD)(1 - TC)(D/V) + (rE)(E/V) 23b. If a firm borrows $50 million for one year at an inte

Calculating Bond Prices

Please help with the following problem. Provide step by step calculations. You own a 20-year, $10,000 par value bond paying 7% interest annually. The market price of the bond is $875, and your required rate of return is 10%. A) Compute the bond's expected rate of return B) Determine the value of the bond to you, given y

Economics: Required Rate of Return

The real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, the market risk premium is 4.70%, and Asterisk Enterprises has a beta of 1.10. What is the required rate of return on Asterisk' stock?

Economics - Finance - Present value of cash flow stream

An investment promises the following cash flow stream: $750 at Time 0; $2,450 at the end of Year 1 (or at t = 1); $3,175 at the end of Year 2; and $4,400 at the end of Year 3. At a discount rate of 8.0%, what is the present value of the cash flow stream?

Finance : Stock split and ROE

Question 1.Rooney Inc. recently completed a 3-for-2 stock split. Prior to the split, its stock price was $90 per share. The firm's total market value was unchanged by the split. What was the price of the company's stock following the stock split? 2.Firms A and B are identical except for their level of debt and the interest

Present worth problems

A start-up firm has zero revenues in year 1, but they expect to grow $15,000 per year over the next five years. The present worth of the revenues, assuming a 10% annual rate of interest, is most closely a. $75,000 b. $102,600 c. $33,300 d. $145,300

Bond Price and Interest Rate.

Consider a bond with a duration of 6 years having a yield to maturity of 8% with interest rates expected to increase by 50 basis points (1/2 of 1%). What is the estimated percentage change in the price of the bond if this were to occur?

Create Power Point about 401K

Need help in preparing a 5 slide power point presentation with speaker notes at the bottom of each slide; outlining how much an individual would save in taxes by contributing to a 401K plan. Assuming that the individual's current income is $45,000 per year and is in a 15% tax bracket and is investing 7% of their income into the

Comprehensive Annual Financial Report (CAFR)

I need your help to review the Comprehensive Annual Financial Report. http://www.sjredevelopment.org/Finance/CAFR2008.pdf 1. Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one). a. From where did the fund receive most of its resources? b. Did the city acq

Financial statements of Southwest Airlines

Review the financial statements of Southwest Airlines in its latest annual report. (http://www.southwest.com/investor_relations/annual_reports.html). Then answer questions as follow. ***Please provide with each answer which documents you used so I can review them to absorb the information *** 1) What important informatio

Designing a shaft support using decision tree

Please help with the following problem. Provide the answer in an Excel sheet. Designing a shaft support has two options: using a pair of single row ball (SRB) bearing with a purchasing cost of $25, or using a pair of cylindrical roller bearing (CRB) with a purchasing cost $70. If selecting SRB, it will fail (within a specifi