... 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...
... 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? ... recent
selling prices of a sample of similar New Jersey buildings used as, or available for use
as, warehouses.
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EXCEL
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Brealey−Meyers:
Principles...
...
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...
... 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...
... 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...
... 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...
... 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...
... 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, Seventh Edition
I. Value 3. ... three-year annuity
factor?
e. From your answers to (c) and (d), calculate the three-year discount factor.
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Brealey−Meyers:
Principles of Corporate
F...