CORPORATE FINANCE
12th Edition
ISBN: 9781307702804
Author: Ross
Publisher: MCG/CREATE
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Chapter 30, Problem 9CQ
Bankruptcy Ethics Several firms have entered bankruptcy, or threatened to enter bankruptcy, at least in part as a means of reducing labor costs. Whether this move is ethical, or proper, is hotly debated. Is this an ethical use of bankruptcy?
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A food processing company is considering replacing essential
machinery. Cost and relevant cash flow details are provided in
the table at the right. The company requires an 11% return on
its capital.
a) What is the present value of the yearly cash flows? Use a
Time Value of Money function for full credit. (round to nearest
dollar)
b) What is the net present value of the project? (round to
nearest dollar)
c) What is the internal rate of return of the project? Use a
Time Value of Money function for full credit. (round to two
decimal places)
what is the firms' weighted average cost of capital? please show me weight calculation for each capital source.
A small manufacturer is considering an equipment replacement
project. The new equipment would have an installed cost of
$125,000 and would replace existing equipment that was
purchased 3 years ago at an installed cost of $80,000. If the
company moves forward with the replacement, it could sell the
old equipment for $25,000. Purchasing the new equipment
would result in the company's current assets increasing by
$12,000 and current liabilities increasing by $9,000. The
company uses the 5-year MACRS table for depreciation, and is taxed at
21%.
a) What is the accumulated depreciation of the old equipment?
b) What is the current book value of the old equipment?
c) What is the amount of depreciation recapture/recovery?
d) What is the tax on the sale of the old equipment?
e) What are the after-tax proceeds from the sale of the old
equipment?
f) What is the change in Net Working Capital?
g) What is the initial investment for the project?
Chapter 30 Solutions
CORPORATE FINANCE
Ch. 30 - Prob. 1CQCh. 30 - Prob. 2CQCh. 30 - Prepackaged Bankruptcy What is prepackaged...Ch. 30 - Prob. 4CQCh. 30 - Prob. 5CQCh. 30 - APR What is the absolute priority rule?Ch. 30 - DIP Loans What are DIP loans? Where do DIP loans...Ch. 30 - Bankruptcy Ethics Firms sometimes use the threat...Ch. 30 - Bankruptcy Ethics Several firms have entered...Ch. 30 - Bankruptcy versus Private Workouts Why do so many...
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- A preferred stock has a par value of $105 and pays an annual dividend of 3% of par. If similar investments have an annual rate of return of 5%, what is the current value of this preferred stock. (round to nearest cent)arrow_forwardCommon stock value-Variable growth Lawrence Industries' most recent annual dividend was $1.82 per share (Do = $1.82), and the firm's required return is 15%. Find the market value of Lawrence's shares when dividends are expected to grow at 30% annually for 3 years, followed by a 6% constant annual growth rate in years 4 to infinity. The market value of Lawrence's shares is $ (Round to the nearest cent.)arrow_forwardDepreciation A firm is evaluating the acquisition of an asset that costs $68,400 and requires $3,990 in installation costs. If the firm depreciates the asset under MACRS, using a five-year recovery period (see table |), determine the depreciation charge for each year. The annual depreciation expense for year 1 will be $ The annual depreciation expense for year 2 will be $ The annual depreciation expense for year 3 will be $ The annual depreciation expense for year 4 will be $ The annual depreciation expense for year 5 will be $ The annual depreciation expense for year 6 will be $ (Round to the nearest dollar.) (Round to the nearest dollar.) (Round to the nearest dollar.) (Round to the nearest dollar.) (Round to the nearest dollar.) (Round to the nearest dollar.)arrow_forward
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