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The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares outstanding.
a) Compute the potential dilution from this new stock issue.
Round your answer to the nearest penny and omit the dollar sign.
b) Compute the net proceeds to Houston Corp.
Round the answer to the nearest whole dollar and omit the dollar sign and commas (ex: $12,500,000.23 would be entered as "12500000" without the quotation marks).
c) What rate of return must be earned on the net proceeds so that no dilution of earnings per share occurs?
Omit the percent sign and take the answer to two decimal places (ex: 5.643% would be entered as "5.64" without the quotation marks).
Stock A has a beta of .2, and investors expect it to return 8%. Stock B has a beta of 1.8, and investors expect it to return 12%. Use the CAPM to find the expected rate of return and the market risk premium on the market
Determine the WACC given the above assumptions and indicate how these might be useful to determine the feasibility of the capital project.
If the appropriate interest rate is 8.16 percent, what is the future value of these investment cash flows six years from today?
You work for a pharmaceutical company that has developed a new drug. The patent of the drug will last 17 years. You expect that the drugs profits will $2 million dollars in its first year and that this amount will grow at a rate of 5% per year for th..
Compare the hedging alternatives for the EUR receivables with a scenario under which Yankee remains unhedged and Compare the hedging alternatives for the MYR with a scenario under which Yankee remains unhedged -Do you think Yankee should hedge or r..
Project S costs $15,000, and its expected cash flows would be $4,500 per year for 5 years. Mutually exclusive Project L costs $37,500, and its expected cash flows would be $11,100 per year for 5 years. If both projects have a WACC of 14%, which proje..
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Given this economic background...Compose a 2-4 page report, single-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following:
Atlas Insurance wants to sell you an annuity which will pay you $1,600 per quarter for 25 year. You want to earn a minimum rate of return of 6.5 percent. What is the most you are willing to pay as a lump sum today to buy this annuity?
The Timberlake-Jackson Wardrobe Co. has 11.6 percent coupon bonds on the market with ten years left to maturity. The bonds make annual payments.
What impact would this change have on the equity value of the business? What if the growth rate were only 2 percent and Is the financial risk of the business different under the two acquisition alternatives?
create a powerpoint presentation to demonstrate your understanding of the topic below. use the slide notes function to
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