### XYZ, Inc. has an offer to buy ABC & Sons.

XYZ, Inc. has an offer to buy ABC & Sons. XYZ thinks ABC can produce cash flows of $5k, $9k, & $15k over the next three years (respectively). After that, XYZ thinks ABC will be worthless. Using a 14% rate of return, XYZ must make it’s purchase decision now. What should XYZ pay today to

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### The Danforth Tire Company is considering the purchase

The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections. Year Cash Flow 1. . . . . . . . . $21,000 2. . . .

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### Trying to find the present value of the cash flows with a discount rate of 11% componded quarterly.

Trying to find the present value of the cash flows with a discount rate of 11% componded quarterly. Year Cash Flow 1 $ 900 2 850 3 0 4 1,140

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### What impact does the number of years until maturity have on the value of a bond?

1. What impact does the number of years until maturity have on the value of a bond? 2.List three capital budgeting methods (decision rules) and rank them from least to most useful. Defend your ranking. 3. Should capital budgeting projects be evaluated on their pre-tax or after tax cash flows? Why? 4. What is a

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### Regis Clothiers can borrow from its bank at 11 percent to take a cash discount.

1. Regis Clothiers can borrow from its bank at 11 percent to take a cash discount. The terms of the cash discount are 2/15, net 60. Should the firm borrow the funds? 2. A pawn shop will lend you $2000 for 45 days at a cost of $5 interest. What is your effective rate of

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### In game theory analysis, what is a “dominant strategy”?

1. In game theory analysis, what is a “dominant strategy”? 2. A firm’s most recent annual dividend was $2 per share; its shares sell for $40 in the stock market, and the company expects its dividend to grow at a constant rate of 5% in the foreseeable future. Using the dividend growth (Gordon) model, what

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### Lloyd Enterprises has a project which has the following cash flows:

Lloyd Enterprises has a project which has the following cash flows: Year Cash Flow 0 -$200,000 1 50,000 2 100,000 3 150,000 4 40,000 5 25,000 The cost of capital is 10 percent. What is the project’s discounted payback?

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### Calculating discounted payback.

Calculating discounted payback. An investment project has annual cash inflows of $6,500, $7,000, $7,500, and $8,000, and a discount rate of 14%. What is the discounted payback period for these cash flows if the initial cost is $8,000? What if the initial cost is $13,000? What if it is $18,000?

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### Problem 25-1 Valuation:

Problem 25-1 Valuation: Vandell’s free cash flow (FCF) is million per year and is expected to grow at a constant rate of 5% a year, its beta is 1.4. What is the value of Vandell’s operations? If Vandell has $10.82 millions in debt, What is the current value of Vandell’s stock? (Hi nt Use the

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### Li Retailing reported the following items for the current year:

Li Retailing reported the following items for the current year: Sales = $2,000,000; Cost of Goods Sold = $1,200,000; Depreciation Expense = $140,000; Administrative Expenses = $170,000; Interest Expense = $40,000; Marketing Expenses = $60,000; and Taxes = $20,000. In addition, Li’s current assets increased by $400,000, accounts payable increased by $300,000, 4% notes payable

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