Questions from Corporate Finance

Q: An asset costs $720,000 and will be depreciated in

An asset costs $720,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 34 percent, and the appropriate interest ra...

Q: You own a lot in Key West, Florida, that is

You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.3 million. Over the past five years, the price of land in the area has increased 12 percent per yea...

Q: The capital structure of Ricketti Enterprises, Inc., consists of 25

The capital structure of Ricketti Enterprises, Inc., consists of 25 million shares of common stock and 1.5 million warrants. Each warrant gives its owner the right to purchase one share of common stoc...

Q: Suppose in the previous problem that HISC always needs a conveyor belt

Suppose in the previous problem that HISC always needs a conveyor belt system; when one wears out, it must be replaced. Which system should the firm choose now?

Q: You are considering a new product launch. The project will cost

You are considering a new product launch. The project will cost $760,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 420 units per...

Q: You purchased a zero coupon bond one year ago for $160

You purchased a zero coupon bond one year ago for $160.53. The market interest rate is now 7.5 percent. If the bond had 25 years to maturity when you originally purchased it, what was your total retur...

Q: A stock has an expected return of 13.4 percent,

A stock has an expected return of 13.4 percent, the risk-free rate is 3.8 percent, and the market risk premium is 7 percent. What must the beta of this stock be?

Q: Complete the following sentence for each of these investors: a

Complete the following sentence for each of these investors: a. A buyer of call options. b. A buyer of put options. c. A seller (writer) of call options. d. A seller (writer) of put options. “The (buy...

Q: An all-equity firm is considering the following projects:

An all-equity firm is considering the following projects: The T-bill rate is 3.5 percent, and the expected return on the market is 11 percent. a. Which projects have a higher expected return than th...

Q: Hannon Home Products, Inc., recently issued $2 million worth

Hannon Home Products, Inc., recently issued $2 million worth of 3 percent convertible debentures. Each convertible bond has a face value of $1,000. Each convertible bond can be converted into 23.50 sh...