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The Wendt Corporation had $10.5 of taxable income. A. What is the company’s federal income tax bill for the year? b. Assume the firm receives an additional $1 million of interest income from some bonds it owns. What is the tax of this interest income?
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Find the following values, using the equations, and then work the problems using a financial calculator to check your answers. Disregard rounding differences. (Hint: If you are using a financial calcu
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Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of r_d = 10% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (D_
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Northwestern savings and loan has a current capital structure consisting of $250,000 of 16% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 40%. a. Using EBIT values of $80,000 and $120,000, determine the associ
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MGM Resorts International owns and operates hotels and casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of a recent year, MGM reported accounts receivable of $415,654,000 and
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The intrinsic value of a company’s stock, also known as its fundamental value, refers to the stock’s true value based on expected future cash flows and the risks involved. The value perceived by stock market investors determines the market price of a stoc
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You plan to purchase a $310,000 house using a 15-year mortgage obtained from your local credit union. The mortgage rate offered to you is 7.75 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments on
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Estimating project cash flow is generally the most important, but also the most difficult step in the Capital budgeting process. Methodology, such as the use of NPV versus IRR, is important, but less so than obtaining a reasonably accurate estimate of pro
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The interest rate on one-year Treasury bonds is 0.4%, the rate on two-year T-bonds is 0.8%, and the rate on three-year T-bonds is 1.1%. Using the expectations theory, compute the expected one-year interest rates in (a) the second year (Year 2 only) and (
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You deposit $1,000 in a savings account that pays 9 percent interest, compounded quarterly. How much will your account be worth in 6 years? a. $1,608.44 b. $2,067.22 c. $1,377.10 d. $1,705.77 e. $1,950.99
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What is a blind trust?
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In 1970, Walmart offered 300,000 shares of its common stock to the public at a price of $16.50 per share. Since that time, Walmart has had 11 two-for-one stock splits. On purchase of 100 shares at $1
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Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent. 1. An initial $500 compounded for 1 year at 6%. 2. An
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Discuss the suitability of the various sources of finance a large business might use when replacing old machinery.
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A check-cashing store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 6.7 percent interest per week. a. What APR must the store report to its customers? What EAR are customers actually paying? b.
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For a recent year, OfficeMax and Staples are two companies competing in the retail office supply business. OfficeMax had a net income of $34,894,000, while Staples had a net loss of $210,706,000. OfficeMax had preferred stock of $28,726,000 with preferred
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The dividend discount model will find more undervalued stocks when the overall stock market is depressed. a. True b. False
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Keane Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $191,140 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annu
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Lupe made a down payment of $9000 toward the purchase of a new car. To pay the balance of the purchase price, she has secured a loan from her bank at the rate of 5%/year compounded monthly. Under the
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Sam wants to invest enough money today to have $3,200 for tuition when he goes to college in two years. If he invests his money at 6% per year, compounded monthly, how much does he need to invest?
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The S&P 500 is an example of a: a. Stock exchange b. Primary market c. Capital structure d. Stock index
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Xu Lin recently obtained a 10-year, $50,000 loan. The loan carries an 8% compound annual interest rate and calls for annual installment payments of $7,451.47 at the end of each of the next 10 years. a
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Suppose you need $1 million dollars to start your Dream Business. Research ways to get the money for such a business. Compare two (2) sources of financing you might obtain. (e.g., Small Business Adm
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What are the basic banking and finance domain certifications for IT professionals?
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Melody Dairy has a line of credit with its bank. The firm plans to borrow $400,000 at a rate of 10 percent. The bank requires a 15% compensating balance and the firm currently maintains $20,000 in its
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Old Town needs to resurface a section of its roads this spring. The town council is considering using one of two technologies. The first involves putting down stone and gravel the first year and gradi
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Student Finance (StuFi) is a startup that aims to use the power of social communities to transform the student loan market. It connects participants through a dedicated lending pool, enabling current
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Douglas bonds mature in 10 years and have an annual coupon rate of 10.5 percent with semiannual payments. The $1,000 par value bond currently trades at $1,105 in the market. Compute the annual yield to maturity on the Douglas bonds.
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Assume that you can buy a $6,600 computer system in monthly installments for 3 years. The seller charges you 12% compounded interest compounded monthly. What is your monthly payment? (assume your firs
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You want to have $2 million when you retire in 40 years. If you can earn 12% per year, how much do you need to deposit on a monthly basis if the first payment is made in one month?
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Mr. Deneau accumulated $100,000 in an RRSP. He converted the RRSP into an RRIF and started to withdraw $4,500 at the end of every three months from the fund. If interest is 6.75% compounded monthly, for how long can Mr. Deneau make withdrawals?
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You bought a house 8 years ago with a $250,000 mortgage. It was a 15 year loan with monthly payments which will pay off the loan when you make the last payment. The interest rate was 6%. What are you
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Are debt consolidation loans taxable?
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Calculate the future value of a $350,000 home that you are buying today if the home’s value grows at 6% for the next 15 years. A) What is the future value of this purchase? B) What is the present valu
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OM Construction Company must choose between two types of cranes. Crane A costs $600,000, will last for five years, and will require $60,000 in maintenance each year. Crane B costs $750,000, will last for seven years, and will require $30,000 in maintenanc
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Why is a share of Microsoft common stock an asset for its owner and a liability for Microsoft?
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Can I cash a check of Chase Bank in Bank of America?
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You are planning to save for retirement over the next 25 years. To do this, you will invest $500 a month in a stock account and $200 a month in a bond account. The return of the stock account is expec
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What is the tax classification for Uber?
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What is the future value of a 5%, 5-year ordinary annuity that pays $600 each year? If this was an annuity due, what would its future value be?
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