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Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following:
a. A bond that has a $1000 par value (face value) and a contract or coupon interest rate of 11.7% that is paid semiannually. The bond is currently selling for a price of $1122 and will mature in 10years. The firm's tax rate is 34%.
b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company?
c. A new common stock issue that paid a $1.76 dividend last year. The par value of the stock is $15, and the firm's dividends per share have grown at a rate of 8.3% per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now $27.97.
d. A preferred stock paying a 9.8% dividend on a $124 par value. The preferred shares are currently selling for $ 154.62.
e. A bond selling to yield 13.4% for the purchaser of the bond. The borrowing firm faces a tax rate of 34%.
what is compounding and how does it affect the future value of an
In practice, statistical models to predict bankruptcy are fairly difficult to construct. One of the variables that may be useful in distinguishing between firms that go bankrupt and firms that stay solvent is the return on assets (ROA).
what would be the anticipated decrease in the firm's stock price that the markets would immediately incorporate? Hit Hard has 3 million shares outstanding.
What must the Credit Suisse strategist have been expecting would happen to Abercrombie & Fitch's stock for this strangle strategy to be profitable?
a - Sunk Cost; b- Opportunity cost; c - Erosion 6 - Explain how you would conduct a scenario and sensitivity analysis of the project? Project specific risks and market risks related to the project?
The earnings, dividends, and stock price of the Abbott Company are expected to grow at 9 percent per year. Abbott's common stock sells for $30 per share, and the company will pay a year-end dividend of $2.40. What is its cost of retained earnings?
What is the cost of a preferred share with a $100 par value that pays a $9.60 dividend per year? The security has a flotation cost of $3.37 and will be retired at its par value in 20 years.
which of the following actions would increase the company's current ratio?
Discuss the proposition that differences in the performance of various firms within an industry limit the usefulness of industry analysis. Provide an example of an industry where this statement holds true.
Gold sells for $325 per ounce and copper sells for $0.85 per pound. Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Copper?
You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?
If your goal is to generate a portfolio with the expected return of 14.25%, how much money will you invest in stock A. In Stock B.
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