Brealey−Meyers: Principles of Corporate Finance, 7th Edition - Chapter 5 docx

... ϩ 800 1. 152 ϩ 150 11. 152 2 2 ϩ 150 11. 152 2 3 ϩ 150 11. 152 2 4 ϩ 150 11. 152 2 5 NPV ϭϪ1,000 ϩ 800 .50 ϩ 150 1 .50 2 2 ϩ 150 1 .50 2 3 ϩ 150 1 .50 2 4 ϩ 150 1 .50 2 5 Ϫ 150 1 .50 2 6 ϭ 0 4 By Descartes’s “rule of signs” ... 400 /5 = 80, or $80,000 per year. † Capital investment is $400,000 in year 0. Year 12 3 456 7 1. Revenue 140 140 140 140 140 140 140 2. Ope...

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... value of Marvin’s growth opportunities (PVGO). The market valued Mar- 252 ϩ 299 ϭ $55 1 million ϭ $ 252 million PV ϭ 24 million ϫ c a 5 tϭ1 6.00 Ϫ 3 .50 11.202 t ϩ 5. 00 Ϫ 3 .50 .20 ϫ 11.202 5 d ... how far it is depreci- ated, it is more profitable to sell the equipment for $2 .50 per unit than to operate it and lose $1. 25 per unit. ϭϪ2 .50 ϩ 5. 75 Ϫ 5. 50 .20 ϭϪ$1. 25 pe...

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... Pricing of Ini- tial Public Offerings,” Journal of Applied Corporate Finance, 7:66–74 (Spring 1994). T. Loughran and J. R. Ritter: “The New Issues Puzzle,” Journal of Finance, 50 :23 51 (March 19 95) . ... Executive Officer since that date. He is a past president of the Institute of Brealey−Meyers: Principles of Corporate Finance, Seventh Edition IV. Financial De...

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... “The Investment-Financing Nexus: Some Empirical Evidence,” Midland Corpo- rate Finance Journal 3 (Fall 19 85) , pp. 53 59 . Brealey−Meyers: Principles of Corporate Finance, Seventh Edition V. Dividend ... 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 Finance,...

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... 12 .50 70 .52 17.10 January 2002 $ 45 $12.00 $ 2.90 50 8. 45 4. 35 55 5. 75 6 .55 60 3. 75 9 .55 65 2. 25 13.20 70 1. 45 17 .50 January 2003* $ 50 $13.30 $ 7.30 60 8.80 12.40 70 5. 90 19.40 80 3. 85 27.80 100 ... Ϫ $55 ϭ $ 45 566 PART VI Options Exercise Price of Price of Put Option Maturity Price Call Option Option October 2001 $ 45 $10 .50 $ 1.97 50 6. 75 3. 15 5...

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... Month 6 Stock Buy 1.0 shares $55 $82.67 Borrow PV (55 ) 55 55 Total payoff $ 0 $27.67 Price ϭ $82.67Price ϭ $55 $55 .00 (?) Now $82.67 ($27.67) $36.62 ($0) $55 .00 ($0) Month 6 Month 3 $67.43 (?) $44.88 (?) FIGURE ... continuously compounded rate. 55 ϫ e Ϫ .5 .0392 ϭ $53 .93e .0392 ϭ 1.04 PV1EX2 ϭ 55 /11.042 .5 ϭ $53 .93 Brealey−Meyers: Principles of Corporate Finance, Se...

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... duration of the 1-year debt is 1 year, and the duration of the 6-year debt is 4.6 years. The dura- tion of the package of 1- and 6-year debt is a weighted average of the durations of the individual ... so on. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VIII. Risk Management 27. Managing Risk © The McGraw−Hill Companies, 2003 CHAPTER TWENTY-SE...

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... Sachs, the last of the leading investment-bank part- nerships, issued shares and became a public corporation in 1998. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value ... overseas invest- ments. We discuss international corporate finance at many different points in the chapters that follow. Brealey−Meyers: Principles of Corporate Finance, Sev...

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... investment: NPV ϭ 95, 650 Ϫ 100,000 ϭϪ$4, 350 PV ϭ 110,000 1. 15 ϭ $ 95, 650 Expected return ϭ expected profit investment ϭ 110 Ϫ 95. 65 95. 65 ϭ . 15, or 15% Brealey−Meyers: Principles of Corporate Finance, ... $106 .54 of immediate consumption. Because of the investment, G has $114 next year to pay off the loan. The investment’s NPV is 106 .54 Ϫ 100 ϭϩ6 .54 . Brealey−...

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... 18,990 ,52 7,646 226 2, 350 ϩ 10 ϭ 2,360 2 05, 756 ,782, 755 ϩ 20 ,57 5,678,2 75 ϭ 226,332,461,030 TABLE 3.2 Value of $100 invested at 10 percent simple and compound interest. Brealey−Meyers: Principles of Corporate ... shows that $38 .55 must be invested now to obtain $100 after 10 periods. Conversely, the present value of $100 to be received after 10 years is $38 .55 . Brealey...

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