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The treasurer of Riley Coal Co. is asked to compute the cost of fixed income securities for her corporation. Even before making the calculations, she assumes the aftertax cost of debt is at least 6 percent less than that for preferred stock. Debt can be issued at a yield of 8.4 percent, and the corporate tax rate is 40 percent. Preferred stock will be priced at $57 and pay a dividend of $5.80. The flotation cost on the preferred stock is $5.
a. Compute the aftertax cost of debt. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
b. Compute the aftertax cost of preferred stock. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Hassle-Free Web is bidding to provide web hosting services for hotel Lisbon. Hotel Lisbon pays its current provider $10,200 per year fo hosing its web page, handling transactions. Hassle-Free figures that it will need to purchase equipment worth $14,..
The required rate of return on ABC’s equity is 8%, the current plowback ratio is 40%, and the next year’s dividend is $2 per share. Assume ROE=8%. What is the current stock price? What will be the stock price if the plowback ratio changes to 20%? Wha..
The only way for behavioral patterns to persist in prices is if ______________.
Erna Corp. has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. Erna Corp. also has two bond issues outstanding. Suppose the most recent dividend was $4.50 and the dividend growth rate ..
Which of the following is CORRECT regarding the tiebreaker rules for a qualifying child?
How much of this total value represents the contributed principal, and how much is interest?
Lycan, Inc., has 7.6 percent coupon bonds on the market that have 9 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 9.6 percent, what is the current bond price?
Assume a stock is initially priced at $50, and pays an annual $2 dividend. An investor uses cash to pay $25 a share and borrows the remaining funds at a 12 percent annual interest. What is the return if the investor sells the stock for $55 at the end..
Bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio?
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.806 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a ma..
The toyota motor company is advertising a 24 month lease of 2014 camry for $189 payable at the beginning of each month. The lease requires $2,399 down payment plus first month payment. Assuming an interest rate of 6% compounded monthly, what is the ..
In recent years, Haverhill Corperation has averaged a net income of $10 million per year on net sales of $100 million per year. It currently has no-long term debt, but is considering a debt issue of $5 million. The interest rate on the debt woyuld be..
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