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Cash Flow Estimation/Risk Analysis A) Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included. Real Options B) In general, do timing options make it more or less likely that a project will be accepted today? Capital Budgeting C) When two mutually exclusive projects

-No-Arbitrage and Security Prices- Consider two securities that pay risk-free cash flows over the next years and that have the current market prices shown here: Security Price Today($) Cash flow in One Years ($)Cash flow in Two Years B1 94 100 0 B2 85 0 100 a.What is the no-arbitrage price of a security that

You are running a hot internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $1,000,000. What is the

The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par value. Bond Proceeds

For each of the following activities, identify where the activity would be reported on the statement of cash flows. O -Operating I -Investing F -Financing 1. Change in accounts receivable 2. Acquisition of fixed assets 3. Change in short-term borrowing 4. Change in inventories 5. Change in long-term borrowing 6. Purchase of municipal bonds with

Problem: 5.Calculate the effective duration of a bond to a 100 basis point change in interest rates with a 6-1/4 coupon, 10-years remaining to maturity, and an asking quote of 110.7811 (decimal, not 32nds). Calculate the effective convexity to a 100 basis point change of the bond in Question 5. Calculate the total percentage price

Yawl Inc. must choose between two business opportunities. Opportunity 1 will generate $40,000 before-tax cash flow in years 0, 1 and 2, with a $7,000 annual tax cost. Opportunity 2 will also generate $40,000 before-tax cash flow in years 0, 1 and 2. However, the tax cost will be $15,000 in year 0, $2,500 in

Delta Industries has just issued callable ten-year, 8% coupon bonds with semi-annual coupon payments. The bonds can be called at par in four years or anytime thereafter on a coupon payment date. The current bond price is $1000. For an investment today in these bonds (assuming no transaction costs): a. What is an investor’s Yield

How would you determine the cost of equity. There is know interest rate like you have with a bond, so how do you know what rate to use? 150 words

A US exporter has a Thai baht account receivable resulting from an export sale on April 1 to a customer in Thailand. The exporter signed a forward contract on April 1 to sell Thai baht and designated it as a cash flow hedge of a recognized Thai baht receivable. The spot rate was $0.022 on

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