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Gresham Corporation has 40% debt and 60% equity (market values) in its capital structure. The pretax cost of debt is 8.5%, and that of equity 15.5%. The total value of the company is $320 million and its income tax rate is 40%. Gresham has to raise $30 million in new capital, which will make the expected EBIT of the company to be $22 million, with a standard deviation of $11 million. The company has decided to raise the new capital half with debt and half with equity at the existing rates. Calculate Gresham's new WACC, and the probability that its interest coverage ratio will be less than one.
Source Funding Cost of Funding Loan $700,000 8%/year/month Bonds $500,000 6%/year/quarter Common Stock $400,000 $0.75 dividend/year; 5% annual share price growth Retained Earnings $400,000 Great Eats effective tax rate is 34% with taxes paid annually..
Portray this in a cash flow diagram time line and with an 11.25% borrowed interest rate, calculate the net present worth of money.
Build the IS-LM function - analyze the behavior of the markets for goods and money for each area.
Assume that iwt has not yet made the distribution. What is iwt's intrinsic value of equity? what is its intrinsic per share stock price?
Smith’s company is selling a bond with the following features: 5 years to maturity, face value of $1000, coupon rate of 2% (semiannual coupons) and yield to maturity of 4% APR. What is the price of Smith’s company bond?
hedging using foreign currency derivatives scout finch is the chief financial officer cfo of salem manufacturing a u.s.
How could you use expectancy theory to increase your own motivational level? What kind of facial expression do you think might make a person appear intelligent? In what way is being a member of a virtual team much like being a telecommuter?
Suppose a stock had an initial price of $77 per share, paid a dividend of $1.3 per share during the year, and had an ending share price of $83. Compute the percentage total return.
If the bond (7% coupon rate, annual interest payments, maturing in three years) has a market value of $970, what is this bond's yield to maturity?
A 15-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 12%. What is the bond’s yield to maturity if the bond is selling for $1,070?
You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 20 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are 1.53, 1.38, 0.9, and 1.01, respectively. What is the portfolio beta?
JJ Industries will pay a regular dividend of $2.50 per share for each of the next four years. At the end of the four years, the company will also pay out a $61 per share liquidating dividend, and the company will cease operations. If the discount rat..
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