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

Wednesday, 17 September 2014 by

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

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. . . .

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

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

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

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

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?

Calculating discounted payback.

Wednesday, 17 September 2014 by

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?

Problem 25-1 Valuation:

Wednesday, 17 September 2014 by

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

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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