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juin [17]
3 years ago
15

Monsters Incorporated (MI) in ready to launch a new product. Depending upon the success of this product, MI will have a value of

either $100 million, $150 million, or $191 million, with each outcome being equally likely. The cash flows are unrelated to the state of the economy (i.e. risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate, which is currently 5%. Assume that the capital markets are perfect.
1. Suppose that MI has zero-coupon debt with a $125 million face value due next year. The total value of MI with leverage is closest to:

(1) $133 million
(2) $140 million
(3) $147 million
(4) $125 million


2. Assuming that in the event of default, 20% of the value of MI’s assets will be lost in bankruptcy costs, the initial value of MI’s equity without leverage is closest to:

(1) $150 million
(2) $147 million
(3) $140 million
(4) $133 million


3. Assume that in the event of default, 20% of the value of MI’s assets will be lost in bankruptcy costs and suppose that MI has zero-coupon debt with a $125 million face value due next year. The total value of MI with leverage is closest to:

(1) $140 million
(2) $100 million
(3) $125 million
(4) $134 million
Business
1 answer:
irga5000 [103]3 years ago
3 0
A and then d i’m pretty sure
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dsp73

Answer:

A. Dividend is paid to current shareholders.

Explanation:

This is simply said to be the aggregate amount of all current asset and also all current liability of an investment. It is used in measuring the short term liability of a business by subtracting the current liability from the current asset.

In some cases, it can be tagged a company’s current assets, such as cash, accounts receivable, inventories of goods etc. Many companies sum their's by calculating cash plus accounts receivable plus inventories, less accounts payable and less accrued expenses. This is why it is seen to decrease when dividend is paid to current shareholders.

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If the government increases its spending when the economy is in an expansion, then the presence of automatic stabilizers:
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Answer:

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6 0
3 years ago
g To decrease the money supply, the Fed could Group of answer choices All of the above are correct. increase the discount rate.
lora16 [44]

Answer:

All of the above are correct

Explanation:

When central banks or the Federal Reserve wants to control money supply in the economy it uses various tools that either mop up or increase money supply to the economy.

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Selling of government bonds is used to reduce cash in circulation. As investors buy the bonds money is moved from the economy to the Federal Reserve.

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7 0
3 years ago
Happy Frog Inc. is analyzing a project with the following cash flows: Year Cash Flow 0 -$762,000 1 $300,000 2 $-550,000 3 $660,0
Lelechka [254]

Answer:

Happy Frog Inc.

Modified Internal Rate of Return (MIRR) = (Future value of positive cash flows / present value of negative cash flows) (1/n) – 1

= ($1,400,000 /-$1,198,700) (1/5) - 1

= -1.167932 x -0.8

= 0.934

MIRR = 9.34%

Explanation:

a) Future Value of positive cash flows:

1           $300,000

3          $660,000

4          $440,000

Total $1,400,000

b) Present value of negative cash flows:

0         -$762,000

2         -$436,700    ($550,000 x 0.794)

Total -$1,198,700

c) The Modified Internal Rate of Return for Happy Frog Inc. is greater than its Weighted Average Cost of Capital.  Therefore, the project looks very promising and should be accepted.

6 0
3 years ago
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