High Roller Properties is considering building a new casino at an after-tax cost of $10.0 million at t = 0. The after-tax cash flows the casino generates will depend on whether the state imposes a new income tax, and there is a 50-5o chance the tax will pass. If it passes, after-tax cash flows will be $1.875 million per year for the next 5 years. If it doesn't pass, the after-tax cash flows will be $3.75 million per year for the next 5 years. The project's WACC is 11.8%. If the tax is passed, the firm will have the option to abandon the project 1 year from now, in which case the property could be sold to net $6.00 million after taxes at t = 1. What is the value (in thousands) of this abandonment option? Do not round intermediate calculations. O a. $314 O b. $964 O C. $126 O d. $503 O e. $189

High Roller Properties is considering building a new casino at an after-tax cost of $10.0 million at t = 0. The after-tax cash flows the casino generates will depend on whether the state imposes a new income tax, and there is a 50-5o chance the tax will pass. If it passes, after-tax cash flows will be $1.875 million per year for the next 5 years. If it doesn't pass, the after-tax cash flows will be $3.75 million per year for the next 5 years. The project's WACC is 11.8%. If the tax is passed, the firm will have the option to abandon the project 1 year from now, in which case the property could be sold to net $6.00 million after taxes at t = 1. What is the value (in thousands) of this abandonment option? Do not round intermediate calculations. O a. $314 O b. $964 O C. $126 O d. $503 O e. $189

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

1 . A n d r e i S a n t o s p u r c h a s e d a c o n d o m i n i u m 4 y e a r s a g o f o r P 3 , 6 0 0 ,0 0 0 . 0 0 , p a y i n g P 3 7 , 5 0 0 . 0 0 p e r m o n t h o n h e r P 2 , 0 0 0 , 0 0 0 . 0 0 , 8 % , 2 5 - y e a r m o r t g a g e . T h e c u r r e n t l o a n b a l a n c e i s P 1 , 5 2 4 , 0 1 0 . 0 0 . r e c e n t ly , i n t e r e s t r a t e s d r o p p e d s h a r p l y , c au s i n g A n d r e i t o c o n s i d e r r e f i n a n c i n g h e r c o n d o a t t h e p r e v a i l i n g r a t e o f 6 % . H e e x p e c t s t o r e m a i n i n t h e c o n d o f o r a t l e a s t 4 m o r e y e a r s a n d h a s f o u n d a l e n d e r t h a t w i l l m a k e a 6 % , 2 1 - y e a r , P 1 , 5 2 4 , 0 1 0 . 0 0 l o a n , r e q u i r i n g m o n t h l y p a y m e n t s o f P 1 0 , 6 5 0 . 0 0 . a l t h o u g h t h e r e is…
D1.
Handerson Corporation makes a product with the following standard costs: Standard Quantity or Hours 9.2 kilos Direct materials Direct labor. 0.4 hours Variable overhead 0.4 hours The company reported the following results concerning this product in August Actual output Raw materials used in production Purchases of raw materials. Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost Actual variable overhead cost Multiple Choice Standard Price or Rate $ 6.70 per kilo $ 27.00 per hour $ 6.70 per hour 3,900 units 29,730 kilos 32,300 kilos 1,130 hours $ 202,920 $ 23,436 $ 8,240 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for August is:
Find v in question c and find c in question d
Bumgardner Incorporated has provided the following data concerning one of the products in its standard cost system. Inputs Direct materials Standard Quantity or Hours per Unit of Output 8.0 liters Standard Price or Rate $ 5.00 per liter The company has reported the following actual results for the product for April: Actual output Raw materials purchased 7,400 units 65,400 liters $ 5.70 per liter 59,210 liters Actual price of raw materials Raw materials used in production The raw materials price variance for the month is closest to: (Round your intermediate calculations to 2 decimal places.)
Q7
un.3
How to solve:S= 1/1.06[1-1/(1.06)^20]/1-1/1.06
1 . S u p p o s e t h a t s o m e o n e s t o l e y o u r A T M c a r d a n d w i t h d r e w P 5 0 , 0 0 0 . 0 0 f r o m y o u r c h e c k i n g a c c o u n t . H o w m u c h m o n e y c o u l d y o u l o s e i f y o u r e p o r t e d t h e s t o l e n c a r d t o t h e b a n k : a ) T h e d a y t h e c a r d w a s st o l e n b ) 6 d a y s a f t e r t h e t h e f t c ) 7 5 d a y s a f t e r r e c e i v i n g y o u r p e r i o d i c s t a t e m e n t 2 . Y o u ' r e g e t t i n g m a r r i e d a n d a r e u n h a p p y w i t h y o u r p r e s e n t b a n k . D i s c u s s y o u r s t r a t e g y f o r c h o o s i n g a n e w b a n k a n d o p e n i n g a n a c c o u n t . C o n s i d e r t h e f a c t o r s t h a t a r e i m p o r t a n t t o y o u i n s e l e c t i n g a b a n k - s u c h a s t h e t y p e a n d o w n…
Calculate: 1 1 (1+ r)" х 30 where r=0.093, and n=16
What is the value of (F/G, 3.2%, 9)? O a.1.3278 O b. 38.8212 O c.10.2423 O d. 29.2383 O e. 3.7903
7-3 A

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS