Questions from Corporate Finance

Q: An investment under consideration has a payback of six years and a

An investment under consideration has a payback of six years and a cost of $434,000. If the required return is 12 percent, what is the worst-case NPV? The best-case NPV? Explain. Assume the cash flows...

Q: Suppose it is your task to evaluate two different investments in new

Suppose it is your task to evaluate two different investments in new subsidiaries for your company, one in your own country and the other in a foreign country. You calculate the cash flows of both pro...

Q: A firm is considering an investment in a new machine with a

A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5 million....

Q: Young screenwriter Carl Draper has just finished his first script. It

Young screenwriter Carl Draper has just finished his first script. It has action, drama, and humor, and he thinks it will be a blockbuster. He takes the script to every motion picture studio in town a...

Q: Argos Corp. has 9 percent coupon bonds making annual payments with

Argos Corp. has 9 percent coupon bonds making annual payments with a YTM of 7.81 percent. The current yield on these bonds is 8.42 percent. How many years do these bonds have left until they mature?

Q: You own $100,000 worth of Smart Money stock.

You own $100,000 worth of Smart Money stock. One year from now, you will receive a dividend of $2.25 per share. You will receive a $2.40 dividend two years from now. You will sell the stock for $65 pe...

Q: Consider the following premerger information about firm X and firm Y :

Consider the following premerger information about firm X and firm Y : Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $5 per share. Assuming t...

Q: Solar Engines manufactures solar engines for tractor trailers. Given the fuel

Solar Engines manufactures solar engines for tractor trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting credit. The variable cost is $11,400 pe...

Q: Consider the following abbreviated financial statements for Weston Enterprises:

Consider the following abbreviated financial statements for Weston Enterprises: a. What is owners’ equity for 2011 and 2012? b. What is the change in net working capital for 2012?...

Q: This problem is useful for testing the ability of financial calculators and

This problem is useful for testing the ability of financial calculators and computer software. Consider the following cash flows. How many different IRRs are there? When should we take this project?...