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Suppose your company needs $11 million to build a new assembly line. Your target debt−equity ratio is .45. The flotation cost for new equity is 11 percent, but the flotation cost for debt is only 8 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.
a. What is your company’s weighted average flotation cost, assuming all equity is raised externally?
Flotation cost=?
b. What is the true cost of building the new assembly line after taking flotation costs into account?
Amount raised=?
The Proctor Company must arrange $235,000 financing for its working capital requirements for the coming year. Proctor can (a) borrow from its bank on a simple interest basis (interest payable at the end of the loan) for one year at 7.8 percent simple..
Which of the following is not an example of an anomaly to the efficient market hypothesis?
Dharma Supply has earnings before interest and taxes (EBIT) of $524000, interest expenses of $325000 abd faces a corporate tax rate of 36 percent. What is Dharma Supply's Net Income? what would dharma net income be if it didn’t have any debt?
The "difference" in the buy term and invest the difference strategy is the difference in ______________ between term life insurance and whole life insurance. The primary reason life insurance policies have a savings element is to allow the
Short term financial management - Read the article - Net Operating Working Capital Behavior: A First Look.
You are going to receive $7,000 at the end of each quarter for the next eight years. What is the present value of these payments at a discount rate of 9 percent, compounded quarterly?
A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?
3 years ago Maxi Min INC issued 30 year to maturity zero coupon bonds with a par value of $1000. Now the bond has a yield to maturity of 9.21 percent compounded semi annually. What is the current price of the bond? Round the answer ro two decimal pla..
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
Team B Jake's Sound Systems has 390,000 shares of common stock outstanding at a market price of $31 a share. Its beta is 0.8. Market expected return is 13% and risk-free rate is 6%. Jake's also has 7,700 bonds outstanding with a face value of $1,000 ..
You deposit a sum of $10,000 today in your bank safe deposit box and leave it there. You learn nothing in your bank account as the money is sitting inside the safe deposit box. Assumes that inflation rate is running at 14% a year. How much will your ..
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 10%. The company's weighted average cost of ..
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