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Based on the information below, calculate the weighted average cost of capital.
Great Corporation has the following capital situation.
Debt: One thousand bonds were issued five years ago at a coupon rate of 10%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 40%
Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They're now selling to yield 10%.
Equity: Great Corp has 120,000 shares of common stock outstanding, currently selling at $14.48 per share. The risk free rate is 3%, market rate of return is 10% and the Beta is 1.2.
Provide recommendation and forecast future financial states. Analyze financial standpoint, and future cost saving opportunities.
If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must
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Honda is considering increasing production after unexpected strong demand for its new motorbike. To evaluate the proposal, the company needs to calculate its cost of capital. You've collected the following information: The company wants to maintain i..
Gilliland Motot, Inc., paid a $4.46 dividend last year. If Gilliland's return on equity is 31%, and its retention rate is 31%, what is the value of the common stock if the investors require a rate of return of 18%?
Lynn Ally, owner of a local Subway shop, loaned $42,000 to Pete Hall to help him open a Subway franchise. Pete plans to repay Lynn at the end of 10 years with 6% interest compounded semi annually.
When discounting cash flows:
Suppose that a company must examine an investment today (1st January) costs 100 000 SEK. This investment would provide SEK 30 000 in cash to the company at the end of each year for the 5 coming years. Calculate and answer whether the company should i..
A bond has a $1,000 par value, 15 years to maturity, and a 8% annual coupon and sells for $1,080. A) Assume that the yield to maturity remains constant for the next 4 years. What will the price be 4 years from today?
In September, Ricardo Castíllo got a promotion and a raise. Because his monthly expenses did not increase very much, Ricardo was able to save more dollars. He saved $1,070, which was 40% of his new salary. How much was Ricardo's new salary?
In the below question, you are asked to compare two options with parameters as given. The risk- free interest rate for all cases should be assumed to be 2%. Assume the stocks on which these options are written pay no dividends. Which put option mus..
Over a 40-year period an asset had an arithmetic return of 12.5 percent and a geometric return of 10.4 percent. Using Blume’s formula, what is your best estimate of the future annual returns over 7 years? 11 years? 20 years?
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