Brealey−Meyers: Principles of Corporate Finance, 7th Edition - Chapter 18 docx

... 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, Seventh Edition V. Dividend Policy ... stream of cash flows of $28 per year. The risk of these flows is likely to be less than the risk of the operating assets of L. The tax shields Brealey−Meyers: Prin...

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... satisfactory way of defining the true rate of re- turn of a long-lived asset. The best available concept is the so-called discounted- cash-flow (DCF) rate of return or internal rate of return (IRR). ... one we ob- tained earlier. Instead of investing in one unit of project A and one of project D, we are told to take half of project A, all of project B, and three-quarters...

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... 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? ... Sparky-Cola also invests? What if Ecsy-Cola invests right away and gains a one-year head start on Sparky-Cola? 18 We thank Anthony Neuberger for suggesting this topic. Brealey−Meyers: P...

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... Description of Capital Stock The Company’s authorized capital stock consists of 10,000,000 shares of voting Common Stock. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition IV. ... and has been its Chief Executive Officer since that date. He is a past president of the Institute of Brealey−Meyers: Principles of Corporate Finance, Seventh Edition...

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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 ... use an up-to-date risk-free interest rate. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VI. Options 20. Understanding Options © The McGraw−Hil...

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... parity formula from Chapter 20: Value of put ϭ value of call Ϫ value of stock ϩ PV1exercise price2 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VI. Options 21. Valuing Options © ... each tree we show a histogram of the possible six-month price changes, assuming investors are risk- neutral. Brealey−Meyers: Principles of Corporate Finance, Sev...

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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 ... dealer to swap a a10 million five-year fixed-rate loan for an equivalent floating-rate loan in euros. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition...

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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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... and Ethics: The Case of Salomon Broth- ers,” Journal of Applied Corporate Finance 5 (Summer 1992), pp. 23–28. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value 2. Present ... values. • Rate -of- return rule. Accept investments that offer rates of return in excess of their opportunity costs of capital. 5 The Opportunity Cost of Capital The oppo...

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... $18, 400—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: Principles of Corporate Finance, ... three-year annuity factor? e. From your answers to (c) and (d), calculate the three-year discount factor. Visit us at www.mhhe.com/bm7e Brealey−Meyers: Principles of Corpora...

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