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Gasworks, Inc., has been approached to sell up to 6...
Gasworks, Inc., has been approached to sell up to 6 million gallons of gasoline in three...
Gasworks, Inc., has been approached to sell up to 6 million gallons of gasoline in three months at a price of $4.35 per gallon. Gasoline is currently selling on the wholesale market at $4.00 per gallon and has a standard deviation of 56 percent. If the risk-free rate is 5 percent per year, what is the value of this option? Use the two-state model to value the real option. (Do not round intermediate calculations and enter your answer in dollars,...
I will thumbs up correct anwser. Berstein discusses government perpetuities issued by governments in medieval Europe....
I will thumbs up correct anwser.
Berstein discusses government perpetuities issued by governments in medieval Europe. A perpetuity is a type of a bond that promises to pay a fixed payment periodically (e.g., every six months) but never matures. The payment is defined as a percent of a fixed, stated par. For example, a 5% perpetuity with annual payments and par of $100 is a promise by the issuer to pay the holder 5% of $100, or $5, each year....
Hickock Mining is evaluating when to open a gold mine. The mine has 40,000 ounces of...
Hickock Mining is evaluating when to open a gold mine. The mine has 40,000 ounces of gold left that can be mined, and mining operations will produce 5,000 ounces per year. The required return on the gold mine is 10 percent, and it will cost $33.0 million to open the mine. When the mine is opened, the company will sign a contract that will guarantee the price of gold for the remaining life of the mine. If the mine is...
Newkirk, Inc., is an unlevered firm with expected annual earnings before taxes of $22.7 million in...
Newkirk, Inc., is an unlevered firm with expected annual earnings before taxes of $22.7 million in perpetuity. The current required return on the firm's equity is 15 percent, and the firm distributes all of its earnings as dividends at the end of each year. The company has 1.47 million shares of common stock outstanding and is subject to a corporate tax rate of 40 percent. The firm is planning a recapitalization under which it will issue $31.7 million of perpetual...
National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid....
National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as a special dividend at the end of three years. In this case, the firm can invest in either Treasury bills yielding 2 percent or a 4 percent preferred stock. IRS regulations allow the company to...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large,...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSS). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $7 million in anticipation of using it as a toxic dump site for waste chemicals, but it...
Your company has been approached to bid on a contract to sell 5,500 voice recognition (VR)...
Your company has been approached to bid on a contract to sell 5,500 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4.5 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $465,000 to be returned at the end...
Your company has been approached to bid on a contract to sell 5,500 voice recognition (VR)...
Your company has been approached to bid on a contract to sell 5,500 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4.5 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $465,000 to be returned at the end...
Your company has been approached to bid on a contract to sell 5,250 voice recognition (VR)...
Your company has been approached to bid on a contract to sell 5,250 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $440,000 to be returned at the end...
Your company has been approached to bid on a contract to sell 5,800 voice recognition (VR)...
Your company has been approached to bid on a contract to sell 5,800 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $5.1 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $495,000 to be returned at the end...
I will thumbs up correct anwser.
Berstein discusses government perpetuities issued by governments in medieval Europe. A perpetuity is a type of a bond that promises to pay a fixed payment periodically (e.g., every six months) but never matures. The payment is defined as a percent of a fixed, stated par. For example, a 5% perpetuity with annual payments and par of $100 is a promise by the issuer to pay the holder 5% of $100, or $5, each year....
Hickock Mining is evaluating when to open a gold mine. The mine has 40,000 ounces of gold left that can be mined, and mining operations will produce 5,000 ounces per year. The required return on the gold mine is 10 percent, and it will cost $33.0 million to open the mine. When the mine is opened, the company will sign a contract that will guarantee the price of gold for the remaining life of the mine. If the mine is...
Newkirk, Inc., is an unlevered firm with expected annual earnings before taxes of $22.7 million in perpetuity. The current required return on the firm's equity is 15 percent, and the firm distributes all of its earnings as dividends at the end of each year. The company has 1.47 million shares of common stock outstanding and is subject to a corporate tax rate of 40 percent. The firm is planning a recapitalization under which it will issue $31.7 million of perpetual...
National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as a special dividend at the end of three years. In this case, the firm can invest in either Treasury bills yielding 2 percent or a 4 percent preferred stock. IRS regulations allow the company to...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSS). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $7 million in anticipation of using it as a toxic dump site for waste chemicals, but it...
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