Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 8, Problem 7P
Castle View Games would like to invest in a division to develop software for video games. To evaluate this decision, the firm first attempts to project the working capital needs for this operation. Its chief financial officer has developed the following estimates (in millions of dollars):
Assuming that Castle View currently does not have any working capital invested in this division, calculate the cash flows associated with changes in working capital for the first five years of this investment.
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Castle View Games would like to invest in a division to develop software for a soon to-be-released video game console. To evaluate this decision, the firm first attempts to project the working capital needs for this operation. Its chief financial officer has developed estimates (in millions of dollars).
If Castle View currently does not have any initial working capital invested in this division, calculate the cash flows associated with changes in working capital for the first five years of this investment.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’ cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:
•The firm’s tax rate is 35%.
•The current price of Harry Davis’ 12.5% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1105.67. Harry Davis does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.
•The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $114.27. Harry Davis would incur flotation costs…
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’ cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:
•The firm’s tax rate is 35%.
•The current price of Harry Davis’ 12.5% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1105.67. Harry Davis does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.
•The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $114.27. Harry Davis would incur flotation costs…
Chapter 8 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 8.1 - How do we forecast unlevered net income?Ch. 8.1 - Prob. 2CCCh. 8.1 - Prob. 3CCCh. 8.2 - Prob. 1CCCh. 8.2 - What is the depreciation tax shield?Ch. 8.3 - Prob. 1CCCh. 8.3 - Prob. 2CCCh. 8.4 - Prob. 1CCCh. 8.4 - What is the continuation or terminal value of a...Ch. 8.5 - Prob. 1CC
Ch. 8.5 - How does scenario analysis differ from sensitivity...Ch. 8 - Pisa Pizza, a seller of frozen pizza is...Ch. 8 - Kokomochi is considering the launch of an...Ch. 8 - Home Builder Supply, a retailer in the home...Ch. 8 - Hyperion, Inc. currently sells its latest...Ch. 8 - Table 8.1 Spreadsheet HomeNets Incremental...Ch. 8 - Prob. 6PCh. 8 - Castle View Games would like to invest in a...Ch. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - A bicycle manufacturer currently produces 300,000...Ch. 8 - One year ago, your company purchased a machine...Ch. 8 - Prob. 15PCh. 8 - Markov Manufacturing recently spent 15 million to...Ch. 8 - Prob. 17PCh. 8 - Arnold Inc. is considering a proposal to...Ch. 8 - Bay Properties is considering starting a...Ch. 8 - Prob. 21PCh. 8 - Prob. 22P
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