Foundations of Financial Management
Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 20, Problem 10P

a.

Summary Introduction

To calculate: The value offered per share of Chicago Savings Corp.

Introduction:

Share Price:

The highest price of one share of a company that an investor is willing to pay is termed as the share price. It is current price used for the trading of such a share.

b.

Summary Introduction

To calculate: The percentage gain at the computed price in part (a) for Chicago Savings Corp.

Introduction:

Rate of return:

A rate that shows the net profit or loss, an investor earns or loses on the investment over a particular time period is termed as the rate of return.

Percentage Gain:

It is the percentage that shows the net gain, an individual gain at the time of selling a product and it can be calculated by dividing the difference of the cost price and selling price from the original price (cost price). It is incurred when a product is sold at more than its cost price.

c.

Summary Introduction

To calculate: The percentage loss value after the cancellation of merger for Chicago Savings Corp.

Introduction:

Rate of return:

A rate that shows the net profit or loss that an investor earns or loses on the investment over a particular time period is termed as the rate of return.

Percentage Loss:

It is the percentage that shows the net loss that an individual loses at the time of selling a product and it can be calculated by dividing the difference of the cost price and selling price from the original price (cost price). It is incurred when a product is sold at less than its cost price.

d.

Summary Introduction

To calculate: The expected value of the return on Chicago Savings Corp.’s investment.

Introduction:

Expected value:

Also known as the mean, it is the value that is estimated or anticipated to be earned in the future from an investment. It is computed by adding up the values that are the result of multiplying each outcome from the probability.

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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
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