QUESTION A company is going to issue a $1,000 par value bond which pays 8% in annual interest. The company expects investors to pay $910 for the 20-year bond. The expected flotation cost per bond is $42. What is the firms cost of debt in this example? (Assume a 34% tax rate.) Face value = […]
Date: September 2nd, 2020
QUESTION a) Suppose you have three personal loans outstanding to your friend Elizabeth. A payment of $1,000 is due today, a $1,500 payment is due one year from now, and a $2,500 payment is due two years from now. You would like to consolidate the three loans into one, with 36 equal monthly payments, beginnin […]
Date: September 2nd, 2020
QUESTION How do you calculate the total market value of debt? The simple formula to calculate Market Value added is Market Value added = Market Value Capital Capital Invested. This value is the difference between the current market value of a company and the capital given by investors; this includes both shareholders and bondholders. If […]
Date: September 2nd, 2020
QUESTION Based on the corporate valuation model, the value of a companys operations is $1,200 million. The companys balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 Total Market Value = Total value of operation […]
Date: September 2nd, 2020
QUESTION The buzz campus eatery offers a specific type of biscuits for $1.5 each from 8am to 3pm. The biscuits are ordered from a supplier at the start of each day and delivered before the store opens. The supplier charges 75 cents per biscuit. If, at 3pm, some biscuits are left, the buzz people mark […]
Date: September 2nd, 2020
QUESTION Information for questions 19 and 20: Briar Tek has fixed costs of $700,000. Selling price per unit is $180 and Variable cost per unit is $110.19: How many units must Briar Tek Sell to earn a profit of $560,000?A. 10,000B. 14,000C. 18,000D. 20,00020: A new employee suggests that Briar Tek sponsor a l 19: […]
Date: September 2nd, 2020
QUESTION Green Manufacturing, Inc., plans to announce that it will issue $3 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a 6 percent annual coupon rate. Green is currently an al-equity firm worth $9.5 Million with 600,000 shares of common stock ou a. Expected […]
Date: September 2nd, 2020
QUESTION Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $5.43 per unit, and the variable labor cost is $3.13 per unit.a. What is the variable cost per unit?b. Suppose NSI incurs fixed costs of $720,000 during a year in which total production is 280,000 units. What are a. Variable cost per […]
Date: September 2nd, 2020
QUESTION The L-S Mining Company is planning to open a new strip mine in western Pennsylvania. The net investment required to open the mine is $10 million. Net cash flows are expected to be +20 million at the end of year 1 and +5 million at the end of year 2. At the end of […]
Date: September 2nd, 2020
QUESTION Your father paid $10,000 (CF at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $13,500 at the end of the 5th year. What is the expected rate of return on this investment?Answer a.15.23%b.10.46%c.12.39%d.12.91%e. 18) […]
Date: September 2nd, 2020
