dividend stream, and they agree on the stock’s riskiness, then they should reach similar conclusions as to the stock’s value. 9-5 A perpetual bond is similar to a no-growth stock and to a share of perpetual preferred stock in the following ways: 1. All three derive their values from a series of cash inflows—coupon payments from the perpetual bond, and dividends from both types of stock. 2. All three are assumed to have indefinite lives with no maturity value (M) for the perpetual bond
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MME 3113: Engineering Management ASSIGNMENT # 1 Total Marks: 100 Computation of financial or management ratios Problem #1 [8+3+3=14] Consider the balance sheet entries in Table 1 for Iron Eagle Corporation. (a) Compute (i) Current assets (ii) Current liabilities (iii) Working capital, (iv) Shareholders’ equity for the corporation. (b) If the firm had a net income of $550,000 after taxes, what is the earning per share? (c) When the firm issued its common stock, what was the market
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ANSWER AND SOLUTION TO MID-SEMESTER 2004 . You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows? a. The discount rate decreases. b. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same. c. The discount rate
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Machine costs $50,000 now Depreciation over a 5-year MACRS life Three years from now, we will sell this machine for $11,000. What will be the ATSV of the machine in three years? 34% Presented and discussed in May 7, 2014, class: http://10.101.116.223/F435/S14/F435All4May7.html Problem #5: (From Quiz #3-B, Fall 2014) initial cost = $10,417,000.00 expected salvage value in 10 years= $3,260,000 marginal tax rate = 34% 15-year MACRS depreciation Problem #6: (From class on Nov. 4, 2014
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counseling, financial counseling, communication skills building, and personal and child welfare information. The overall cost for this project is $3.0 million. Most of our funding will come in the form of government grants. I have secure 2.6 million from the County, State, Federal and private fund. In order to get this project up and running and to expand our business we need to secure a building and have this project up and running in 48 weeks. CSTLO need to shift their operations to meet consumer’s
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allowed without express authorization. In Chapter 1, we saw that the primary objective of financial management is to maximize the intrinsic value of a firm’s stock. We also saw that stock values depend on the timing of the cash flows investors expect from an investment—a dollar expected sooner is worth more than a dollar expected further in the future. Therefore, it is essential for financial managers to understand the time value of money and its impact on stock prices. In this chapter we will explain
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Age: 47 years Time to Retirement: 15 years Amount needed after retirement annually: Rs 4 Lakhs (Real Value) Investment Needs: 1) Education of children 2) Medical Exigencies 3) Leisure Investment Goals in Chronological order: 1) Higher Education a. Child 1 - Rs 40 lakhs (7 years from now) b. Child 2 – Rs 40 lakhs (13 years from now) 2) Marriage Exenses c. Child 1 - Rs 12.5 lakhs (10 years from now) d. Child 2 – Rs 12.5 lakhs (16 years from now) 3) Own
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III only D) I, II, III, and IV only 2. The opportunity to invest in a project can be thought of as a three-year real option on an asset which is worth $500 million (PV of the cash flows from the project) with an exercise price of $800 million (investment needed). Calculate the value of the option given that, N(d1) = 0.3 and N(d2) = 0.15. Assume that the interest rate is 6% per year. A) $150 million B) $49 million C) $30 million D) None of the above. 3. The DCF approach must be: A) Augmented
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full service salon and day spa three years ago, she knew that she would have to make some difficult choices regarding the hiring and firing of qualified professionals such as cosmetologists, estheticians, nail technicians and massage therapists. However, she was confident that her salon management training at Chic University coupled with her industry experience as a stylist would serve her well. And serve her well they certainly did! Within three years of starting her own business, and after
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received in 5 years when interest rates are 8% pa? Answer: Not to be reproduced without the permission of the authors. 1-3 Future Value of a Single Cash Flow Where: cash flow now. time periods into the future. the effective rate over a single period. Not to be reproduced without the permission of the authors. 1-4 Calculation Example: Future Value of a Single Cash Flow Question: You have $100 in the bank. Interest rates are 8% pa. How much will you have in the bank after 5 years? Answer:
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