Questions from Corporate Finance

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

You are considering a new product launch. The project will cost $1,700,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 190 units pe...

Q: McGilla Golf has decided to sell a new line of

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $750 per set and have a variable cost of $330 per set. The company has spent $150,000 for a marketing study that dete...

Q: In the previous problem, you feel that the values are

In the previous problem, you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of...

Q: Hybrid cars are touted as a “green” alternative; however, the

Hybrid cars are touted as a “green” alternative; however, the fi nancial aspects of hybrid ownership are not as clear. Consider the 2006 Honda Accord Hybrid, which had a list price of $5,450 (includin...

Q: In an effort to capture the large jet market, Airbus

In an effort to capture the large jet market, Airbus invested $13 billion developing its A380, which is capable of carrying 800 passengers. The plane has a list price of $280 million. In discussing th...

Q: Suppose the returns on long-term corporate bonds are normally distributed.

Suppose the returns on long-term corporate bonds are normally distributed. Based on the historical record, what is the approximate probability that your return on these bonds will be less than - 2.2 p...

Q: In Problem 18, what is the probability that the return

In Problem 18, what is the probability that the return is less than -100 percent (think)? What are the implications for the distribution of returns?Problem 18:Assuming that the returns from holding sm...

Q: Over a 40-year period an asset had an arithmetic return

Over a 40-year period an asset had an arithmetic return of 15.3 percent and a geometric return of 11.9 percent. Using Blume’s formula, what is your best estimate of the future annual returns over 5 ye...

Q: Assume that the historical return on large-company stocks is a

Assume that the historical return on large-company stocks is a predictor of the future returns. What return would you estimate for large company stocks over the next year? The next 5 years? 20 years?...

Q: Stock Y has a beta of 1.3 and an expected

Stock Y has a beta of 1.3 and an expected return of 18.5 percent. Stock Z has a beta of .70 and an expected return of 12.1 percent. If the risk-free rate is 8 percent and the market risk premium is 7....