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Robinson Company has a marginal tax rate of 40%. The firm can raise debt at a 12% interest rate and the last dividend paid by the firm was $0.90. Robinson 's common stock is selling for $8.59 per share, and its expected growth rate in earnings and dividends is 5%. If Robinson issues new common stock, the flotation cost incurred will be 10%. The firm plans to financial all capital expenditures with 30% debt and 70% equity.
A.) What is Robinson's cost of retained earnings if it can use retained earnings rather than issue new common stock?
B.) What is the cost of the common equity raised by selling new stock?
C.) What is the firm's WACC if the firm has sufficient retained earnings to fund the equity portion of its capital budget?
on January 1, 2013 Gibson corporation entered into a four-year operating lease. The payments were as follows. $21000 in 2012, $19000 in 2013, 16,000 in 2014, 14000 in 2015.
Given that Dov Pharmaceuticals was down by 98% for 2006, why did some investors hold the stock. Why didn't they sell out before the price declined so sharply.
The common stock and debt of Northern Sludge are valued at $60 million and $40 million, respectively. Investors currently require a 16.7% return on the common stock and a 7.0% return on the debt.
Consider three zero-coupon bonds with 2, 10, and 30 years to maturity and with required yields 4%, 7%, and 9%, respectively. Calculate the price and modified duration of the three bonds using annual compounding.
Kitty invested in the New Issue Bio-Tech Fund, which invests in small, newly issued bio-tech stocks and whose investors have earned an average of 16% per year in the fund's relatively short history.
Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses.
caculate the fair value of a stock with a beta of .90 if the riskless rate is 4% and the expected market return is 7% if the stock is expected to pay a dividend $.50 and is expected
A survey on British Social Attitudes asked respondents if they had ever boycotted goods for ethical reasons (Statesman, January 28, 2008). The survey found that 21% of the respondents have boycotted goods for ethical reasons.
You buy 900 shares at $46 per share with an initial margin of 25 percent. One year later, the stock is selling for $54 per share, and you close out your position. What is your return assuming no dividends are paid
Use a properly labelled IS-LM graph to analyze and illustrate the effect and calculate the expected exchange rate for the end of the year.
Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,228,876. have a life of five years, and would produce the cash flows shown in the following table.
You also know the following: the present value of the terminal value is $2,400 million, net debt is $314 million, the cost of equity is 8.5% the weighted average cost of capital is 6.0% and there are 120.000 million diluted shares outstanding.
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