Which of the following would be considered a capital budgeting decision for Apple Computer? a. A $5 billion purchase of trademarks and patents from Blackberry b. An increase in capital by selling new common shares c. Issuing $5 billion of preferred shares to buy back existing bonds d. An issue of $5 billion of bonds to pay for a new manufacturing plant e. Repurchasing $5 billion worth of common shares
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Which of the following would be considered a capital budgeting decision for Apple Computer?
a.
A $5 billion purchase of trademarks and patents from Blackberry
b.
An increase in capital by selling new common shares
c.
Issuing $5 billion of
d.
An issue of $5 billion of bonds to pay for a new manufacturing plant
e.
Repurchasing $5 billion worth of common shares
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- 3. ABC is evaluating an investment in specialized equipment that cost $40 million and is projected to generate after-tax and pre-leverage cash flow of $8 million per year for seven years. The firm’s cost of capital is approximately 4.00%. Determine each of the following capital budgeting metrics and indicate whether and why the equipment should be purchased (or not) by each Reinvest cash flow for the MIRR model at the cost of capital. Payback NPV IRR MIRRâCapital Budgetingâ Simulation and Mini-CaseNote: This is an application of capital budgeting that integrates the projection of a basic cash flow and the computation and analysis of six capital budgeting tools.Your company is thinking about acquiring another corporation. You have two choices; the cost of each choice is $250,000. You cannot spend more than that, so acquiring both corporations is not an option. The following are your critical data:Corporation A:Revenues = 100K in year one, increasing by 10% each year.Expenses = 20K in year one, increasing by 15% each year.Depreciation Expense = 5K each year.Tax Rate = 25%Discount Rate = 10%Corporation B:Revenues = 150K in year one, increasing by 8% each year.Expenses = 60K in year one, increasing by 10% each year.Depreciation Expense = 10K each year.Tax Rate = 25%Discount Rate = 11%You must compute and analyze items (a) through (h) using a Microsoft Excel spreadsheet. Make sure that all calculations can…Budget Wings Airlines is considering upgrading its fleet of aircraft as it expands from a regional airline to one offering service to a more nationwide portfolio of cities and airports. In support of this process, the CFO has asked you to determine the appropriate weighted average cost of capital (WACC) to use in the discounted cash flow analysis. You spend the morning gathering the following information: - Budget Wings has debt outstanding with a market value of $150 million. This debt is in the form of bonds that are currently priced at $946.33 per $1,000 face value and pay a coupon of 3.45%. The current yield-to-maturity (YTM) on these bonds is 4.11%. - Budget Wings stock is currently priced at $54.41 per share. You expect that next year's dividend will be $3.75 and you expect dividends to grow at 3%. The current market value of Budget Wings' common equity is $240 million. - Budget Wings has preferred equity outstanding with a market value of $30 million that offers an annual…
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