Questions from Corporate Finance

Q: Your company is deciding whether to invest in a new

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $275,000 per year. You believe the technology used in the machine has a 10-year life; in other w...

Q: We are examining a new project. We expect to sell

We are examining a new project. We expect to sell 7,100 units per year at $56 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $56 × 7,100 = $397,600...

Q: If Treasury bills are currently paying 4.7 percent and the

If Treasury bills are currently paying 4.7 percent and the inflation rate is 2.2 percent, what is the approximate real rate of interest? The exact real rate?

Q: In Problem 14, suppose you think it is likely that

In Problem 14, suppose you think it is likely that expected sales will be revised upward to 10,800 units if the first year is a success and revised downward to 3,900 units if the first year is not a s...

Q: In Problem 15, suppose the scale of the project can

In Problem 15, suppose the scale of the project can be doubled in one year in the sense that twice as many units can be produced and sold. Naturally, expansion would be desirable only if the project i...

Q: Suppose a share of stock sells for $63. The risk-free

Suppose a share of stock sells for $63. The risk-free rate is 5 percent, and the stock price in one year will be either $70 or $80.a. What is the value of a call option with an exercise price of $70?b...

Q: Which of the following two sets of relationships, at time

Which of the following two sets of relationships, at time of issuance for convertible bonds, is more typical? Why?,,,

Q: Campbell, Inc., has a $1,000 face value convertible bond issue

Campbell, Inc., has a $1,000 face value convertible bond issue that is currently selling in the market for $960. Each bond is exchangeable at any time for 18 shares of the company’s stock. The convert...

Q: Use the option quote information shown here to answer the

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $85.a. Are the call options in the money? What is the intrinsic value of an RWJ Corp...

Q: Liberty Products, Inc., is considering a new product launch. The

Liberty Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $5.3 million for the next eight years. The company uses a discount rate of 11 percen...