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Cooke Co. is comparing two different capital structures. Plan I would result in 8,700 shares of stock and $399,000 in debt. Plan II would result in 12,500 shares of stock and $239,400 in debt. The interest rate on the debt is 11 percent. The all-equity plan would result in 18,200 shares of stock outstanding. Ignore taxes for this problem.
What is the price per share of equity under plan l?
What is the price per share of equity under plan ll?
Suppose your firm needs to raise $10.5 million to construct a new shipping terminal. As CFO, you plan to raise funds in the following manner: For a debt issue, 2.5% of the amount raised will be kept by the Investment Banker, as gross spread. How much..
Businesses must make long term investment decisions for sustainability. Critical questions such as which assets to invest in and at what cost to the organization are crucial the future viability of the business. What is the role and importance of mak..
TAFKAP Industries has 2 million shares of stock outstanding selling at $16 per share, and an issue of $12 million in 8.0 percent annual coupon bonds with a maturity of 15 years, selling at 105 percent of par. Assume TAFKAP’s weighted average tax rate..
Growth in property, plant and equipment is _______________ related to the range and level of services expected to be provided in the planning period.
Negus Enterprises has an inventory conversion period of 73 days, an average collection period of 43 days, and a payables deferral period of 35 days. Assume that cost of goods sold is 80% of sales. What is the length of the firm's cash conversion cycl..
A woman wants to prepare for retirement. On her 25th birthday she begins making monthly deposits of $Y into a fund which earns an annual effective interest rate of 8%. The last deposit is one month prior to her 65th birthday. Write an expression for ..
Your company has a debt to equity ratio equal to 2.5 and a constant debt policy. The company's debt is risky with a beta equal to 0.1, and the market cost of debt is 3%. The corporate tax rate is 15%, the risk free rate is 1% and the return on levere..
Adding which of the following to the analysis of a proposed project will increase the NPV of that project? 1. option to expand 2. option to wait 3. option to abandon 4. Options to expand, wait, and abandon
You buy a government bond that pays interset twice a year. The interset payment is $300 each six months. The bond matures in six years. The face value of the bond is $10,000. The annual market interset rate is 6 percent.
You borrowed $700 at 5% compounded quarterly. Your payments are $150 at the end of each year. How many years will you make payments on the loan?
Voice-Soft Inc. is trying to determine whether to open a new product line, Voice-Write, a speech-to-text product, which is expected to be competitive for four years. The cost of the new capital equipment including shipping and installation is $3100.
Scanlin, Inc., is considering a project that will result in initial after tax cash savings of $1.70 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the c..
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