Brealey−Meyers: Principles of Corporate Finance, 7th Edition - Chapter 4 doc

... flow 5. 84 6 .40 7 .41 8. 74 9.39 Depreciation 1 .45 1.60 1.75 1.97 2.22 Pretax profits 4. 38 4. 80 5.66 6.77 7.17 Tax 1.53 1.68 1.98 2.37 2.51 Aftertax profits 2.85 3.12 3.68 4. 40 4. 66 TABLE 4. 8 Summary ... 10.7% TABLE 4. 2 DCF cost -of- equity estimates for electric utilities in 2001. Source: The Brattle Group, Inc. Brealey−Meyers: Principles of Corporate Finance, Seven...

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... five-year annuity factor2ϩ PV1bond2ϭ PV1coupon payments2ϩ PV1final payment2 PV ϭ 70 1. 048 ϩ 70 11. 048 2 2 ϩ 70 11. 048 2 3 ϩ 70 11. 048 2 4 ϩ 1070 11. 048 2 5 ϭ 1,095.78 Brealey−Meyers: Principles of ... $18 ,40 0—not a substantial decrease from the $23,800 calcu- lated in Chapter 2. Since the net present value is positive, you should still go ahead. 4 Brealey−Meyers: Princ...

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... 57 57 57 57 57 57 4. Net income 28 28 28 28 28 28 28 5. Start -of- year book value † 40 0 343 286 229 171 1 14 57 6. Book rate of return (4 Ϭ 5) 7% 8.2% 9.8% 12.2% 16 .4% 24. 6% 49 .1% TABLE 5.2 Income ... depreciation over five years is 40 0/5 = 80, or $80,000 per year. † Capital investment is $40 0,000 in year 0. Year 12 345 67 1. Revenue 140 140 140 140 140 140 140 2. Operating...

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... value is 40 percent of the difference between salvage value and depreciated investment. 4. The cost of capital is 20 percent. a. What is the value of a one-year-old plant? Of a two-year-old plant? ... effect of Marvin’s announcement on the value of its common stock. Marvin has 24 million units of second-generation capacity. In the absence of any Total NPV ϭ NPV of new pl...

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... AND EVA 14 In practice, investment would be measured as the average of beginning- and end -of- year assets. See Chapter 29. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition III. ... follows: Year after Opening 12 345 Profit 0 40 80 120 170 Depreciation 40 40 40 40 40 Profit after depreciation 40 0 40 80 130 Book value at start of year 200 160 12...

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... Use of Proceeds The net proceeds of this offering are expected to be $36, 744 ,44 5. Of the net proceeds, approximately $27.0 million will be used to finance expansion of the Company’s prin- cipal ... with the Pricing of Ini- tial Public Offerings,” Journal of Applied Corporate Finance, 7:66– 74 (Spring 19 94) . T. Loughran and J. R. Ritter: “The New Issues Puzzle,” Journal...

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... 1963), pp. 43 3 44 3. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition V. Dividend Policy and Capital Structure 18. How Much Should A Firm Borrow © The McGraw−Hill Companies, 2003 CHAPTER ... what causes them. Value of firm ϭ value if all-equity-financed ϩ PV1tax shield2Ϫ PV 1costs of financial 1distress2 Brealey−Meyers: Principles of Corporate F...

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... relationship is Value of callϩ present value of exercise price ϭ value of putϩ share price Ϫ present value of dividend. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VI. Options ... Corp. 3 40 50 7 18 640 50517 65050810 TABLE 20 .4 Prices of options on common stocks (in dollars). See Practice Question 20. Brealey−Meyers: Principles of Corpora...

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... changes –33 0 +50 27 50 23 –77 – 74 –71 –68 – 64 –59 –55 49 43 –36 –29 –20 –11 4 12 25 40 57 76 97 120 147 176 209 246 287 3 34 0 –20–11 4 2512 40 57 76 97 120 147 16 2 8 12 10 14 4 6 Probability % Percent ... 13.752 3Probability of rise ϫ 04 ϩ 311 Ϫ probability of rise2 ϫ 13.7 54 ϭ Ϫ 1 .42 86 ϫ 552 ϩ 30.81 ϭ $7. 24 Value of put ϭϪ .42 86 shares ϩ $30.81 bank loan Breal...

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... value ϭ 865 ϫ 12 Ϫ .620 ϫ 110/1.1 4 2ϭ $6.15 N1d 2 2ϭ .620N1d 1 2ϭ .865 d 2 ϭ 1.1 04 Ϫ .40 ϫ 24 ϭ .304d 1 ϭ log 312/110/1.1 4 24/ 1 .40 ϫ 242 ϩ .40 ϫ 24/ 2 ϭ 1.1 04 N1d 1 2ϭ cumulative normal probability ... the Design of Convertible Debt,” Journal of Applied Corporate Finance, 11 :45 –53 (Spring 1998). Visit us at www.mhhe.com/bm7e Brealey−Meyers: Principles of Corpora...

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