Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 15, Problem 8SP
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To determine: Effective cost of commercial paper.
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Mas-Con is considering the issuance of commercial paper to fund working capital
requirements of $6.4M for 50 days. Mas-Con receives quotes from a dealer of a 0.95%
discount rate, a commitment fee of 0.35% on a $4.5M unused line of credit to back the
commercial paper, and a dealer fee of 0.2%. What is the effective cost of this commercial
paper?
Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 370000 units per year over the project's life at an expected wholesale
price of 170. Actual production will be outsourced at a cost of 96 per unit. Additionally, the company will spend $27000 in interest expense each year towards financing the project. In year 1, the
firm must increase its accounts receivable by $870000, which will return to regular levels at the end of the project. The company spent $291000 last year on software to develop the router. $106.8
million of new equipment will be purchased and then depreciated using the straight line method over a 10-year life. They expect the market value of the equipment to depreciate at 6.6% per year.
The project is expected to end in year 7. The current tax rate is 21%. Use this rate for both income tax rate and the capital gains rate. The WACC for the company is 12.6%. What is the NPV of the
project?μ-
Cisco is considering the development of a wireless home networking appliance, called
HomeNet. The company expects to sell 370000 units per year over the project's life at an
expected wholesale price of 170. Actual production will be outsourced at a cost of 96 per
unit. Additionally, the company will spend $27000 in interest expense each year towards
financing the project. In year 1, the firm must increase its accounts receivable by $870000,
which will return to regular levels at the end of the project. The company spent $291000 last
year on software to develop the router. $106.8 million of new equipment will be purchased
and then depreciated using the straight - line method over a 10-year life. They expect the
market value of the equipment to depreciate at 6.6% per year. The project is expected to end
in year 7. The current tax rate is 21%. Use this rate for both income tax rate and the capital
gains rate. The WACC for the company is 12.6%. What is the NPV of the project?
Chapter 15 Solutions
Foundations Of Finance
Ch. 15 - Dell Computer Corporation (DELL) has long been...Ch. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Explain what is meant by the statement The use of...Ch. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - How can the formula interest = principle rate ...Ch. 15 - How can we accommodate the effects of compounding...Ch. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 1SPCh. 15 - Prob. 2SPCh. 15 - Prob. 3SPCh. 15 - (Estimating the cost of bank credit) Paymaster...Ch. 15 - (Cost of short-term financing) The R. Morin...Ch. 15 - (Cost of secured short-term credit) The Marlow...Ch. 15 - (Cost of short-term financing) You plan to borrow...Ch. 15 - Prob. 8SPCh. 15 - (Cost of trade credit) Calculate the effective...Ch. 15 - (Annual percentage yield) Compute the cost of the...Ch. 15 - Prob. 11SPCh. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of factoring) MDM, Inc. is considering...Ch. 15 - (Cost of factoring) A factor has agreed to lend...Ch. 15 - Prob. 16SPCh. 15 - Prob. 17SP
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