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A friend that has a mid-sized company has hired you and she would like to use you as a consultant. She wants you to calculate the WACC for her firm. She gives you the following information:
Debt
The firm has face value of $150,000,000 outstanding of zero coupon debt that has a yield to maturity of 4.20%.
Equity
The firm has stock with 70 million shares outstanding, a tax rate of 35%, and a beta of 1.2. The firm is expected to pay a dividend of $2.40 next year and it is expected to grow by 4% for the foreseeable future. The expected return on the market is 8% and the risk free rate is 1.50%. What is the WACC of the company?
Roger is preparing to buy all of the stock of FlyNet Inc., a successful C Corporation that is owned by five individuals. He knows that there are others in the wings ready to make an offer for the stock. He needs to move fast and he needs to be reason..
Goods available for sale total $25,000, beginning inventory is $8,000, endings inventory is $12,000, and cost of goods sold is $10,000. How many days is the days-sales-in-inventory?
Suppose the dividends for the Seger Corporation over the past six years were $1.15, $1.23, $1.32, $1.40, $1.50, and $1.55, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
Coinsurance clauses are found in many property policies as well as in many health insurance policies, although the purpose of each is vastly different. Explain the purpose of the coinsurance in both types of insurance. Coinsurance in property insuran..
A 10-year annuity pays $2,500 per month, and payments are made at the end of each month. The interest rate is 9 percent compounded monthly for the first four years, and 7 percent compounded monthly thereafter. What is the present value of the annuity..
In exactly 15 months a bill of $21,200 is due. Today you deposit money such that if the account earns a target rate of return of 8.90% per annum, compounded monthly, the bill is perfectly financed. No other deposits or withdrawals have been made. You..
Digital Imaging (DI) produces photo printers for both the professional and consumer markets. The DI consumer division recently introduced two photo printers that provide color printsrivaling those produced by a professional processing lab. The recomm..
When using a portfolio rate, what would cause the portfolio interest rate on a UL to perform better than the market in an extended declining interest rate market and yet would perform worse than the market in an extended increasing interest rate envi..
Jenstar had secured a contract from the U.S. government to manufacture a missile retrieval system. The contract required that Jenstar provide a qualification report showing that the system was tested and met all the government specifications. Before..
The program manager of a Navy in-production aircraft acquisition program proposes a product improvement program to redesign the ejection seat and aircraft canopy to improve pilot safety. This effort will enhance the system’s performance capability an..
You are reviewing two mutually exclusive projects. You have used several methods of evaluating their profitability. All else being equal, which one will you choose?
You want to create a portfolio consisting of shares in Star plc plus a risk-free asset. You would like this portfolio to have the same beta as the market. What proportion of your money should you invest in each asset?
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