Questions from Corporate Finance

Q: A project that provides annual cash flows of $11,700 for

A project that provides annual cash flows of $11,700 for nine years costs $63,000 today. Is this a good project if the required return is 8 percent? What if it’s 20 percent? At what discount rate woul...

Q: Photochronograph Corporation (PC) manufactures time series photographic equipment. It is

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .60. It’s considering building a new $65 million manufacturing fac...

Q: Parker & Stone, Inc., is looking at setting up a

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $3.6 million in anticipation of using it...

Q: Sunburn Sunscreen has a zero coupon bond issue outstanding with

Sunburn Sunscreen has a zero coupon bond issue outstanding with a $15,000 face value that matures in one year. The current market value of the firm’s assets is $16,200. The standard deviation of the r...

Q: In the previous problem, suppose the required return on

In the previous problem, suppose the required return on the project is 12 percent. What is the project’s NPV?Data from Problem 9:Quad Enterprises is considering a new three-year expansion project that...

Q: In the previous problem, suppose the project requires an initial

In the previous problem, suppose the project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. What...

Q: In the previous problem, suppose the fixed asset actually falls

In the previous problem, suppose the fixed asset actually falls into the three-year MACRS class. All the other facts are the same. What is the project’s Year 1 net cash flow now? Year 2? Year 3? What...

Q: In the previous problem, suppose the fixed asset actually

In the previous problem, suppose the fixed asset actually qualifies for 100 percent bonus depreciation in the first year. All the other facts are the same. What is the project’s Year 1 net cash flow n...

Q: Dog Up! Franks is looking at a new sausage system

Dog Up! Franks is looking at a new sausage system with an installed cost of $460,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sau...

Q: In the previous problem, suppose the fixed asset actually qualifies

In the previous problem, suppose the fixed asset actually qualifies for 100 percent bonus depreciation in the first year. What is the new NPV?Data from Problem 14:Dog Up! Franks is looking at a new sa...