Calculate the cost of debt for a firm that has $10 million in bonds outstanding that mature in 15 years and have 5% coupon rates. Coupons are paid semiannually. The face value of the bonds is $1000 and the price per bond is $900.
In: Finance
Nephros Company is analyzing a project and has determined that the initial cost will be $720,000 and the required rate of return needs to be 15 percent. The project has a 60 percent chance of success and a 40 percent chance of failure. If the project fails, it will generate an annual after-tax cash flow of $145,000. If the project succeeds, the annual after-tax cash flow will be $320,000. The company has further determined that if the project fails, it will shut the project down after the first year and sell the equipment for the after-tax salvage value of $230,000. If however, the project is a success, the company can expand it with no additional investment and increase the after-tax cash flow to $340,000 a year for Years 2-5. At the end of Year 5, the project would be terminated and have no salvage value. What is the expected net present value of this project at Time 0?
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$78,216.54 |
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$83,839.64 |
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$88,247.45 |
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$93,180.72 |
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$98,661.54 |
In: Finance
A firm needs to replace most of its machinery in 7 years at a cost of $450,000. The company wishes to create a sinking fund to have this money available in 7 years. How much should the monthly deposits be if the fund earns 5% compounded monthly?
In: Finance
Gateway communication is considering a project with an initial fix asset cost of 1.070000 that will be depreciated straight line to zero book value over 10 years over the life of the project. At the end of the project the equipment will be sold for an estimated 228000. The project will not change sales but reduced operating costs by 381500 per year. The tax rate is 34 % and required return is 10.3%. The project will be required NWC 46000 which will be recouped when project end. What is the project NPV?
In: Finance
The common stock of Low Cost Foods is expected to earn 12 percent in a booming economy, earn 8 percent in a normal economy, and lose 6 percent in a recession. The probability of a boom is 15 percent, the probability of a normal economy is 80 percent, and the chance of a recession is 5 percent. What is the expected rate of return on this stock?
In: Finance
The net present value of an investment is best defined as the
1 current cost if the investment is made today.
2 net value received at the end of the investment period.
3 present value of the investment's future cash flows minus the investment's cost.
4 net decrease in value caused by waiting to receive the cash benefit from the investment.
5 value received at the end of the investment period minus the investment's cost.
In: Finance
Suppose you are building a refrigerated extension to a storage facility. The cost of labor and materials to build it are 58,000 and 160,000, respectively. The pre-tax discount rate is 12%, the tax rate is 20%, and the extension would add $220,000 to the value of the facility if sold in 10 years. Calculate the present value of the initial cost.
In: Finance
In: Finance
You plan on purchasing a new car in 9 months. The cost of the car in 9 months will be $25,127. How much would you have to invest today to exactly pay for the new car if you investments earn 4.86% APR (compounded monthly)?
In: Finance
Which of the following statement is NOT correct?
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Price Impact is a trading cost for investors when trading common stocks |
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None of the above |
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Fund turnover can hurt mutual fund investors in terms of commission and tax liability |
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Open-end mutual funds offer investors a guaranteed rate of return |
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Fund turnover can hurt mutual fund investors in terms of commission and tax liability |
In: Finance