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The Saunders Investment bank has the following financing outstanding. Debt: 70,000 bonds with a coupon rate of 10 percent and a current price quote of 110; the bonds have 20 years to maturity. 240,000 zero coupon bonds with a price quote of 20 and 30 years until maturity. Assume semiannual compounding. Preferred stock: 160,000 shares of 8 percent preferred stock with a current price of $75, and a par value of $100. Common stock: 2,700,000 shares of common stock; the current price is $61, and the beta of the stock is 1.3. Market: The corporate tax rate is 25 percent, the market risk premium is 8 percent, and the risk-free rate is 5 percent. What is the WACC for the company?
Newcomer Mills is a relatively new firm which will retain all of its earnings for the next four years. Four years from now, the firm expects to pay its first dividend of $0.25 a share. After that, it intends to increase the dividend by 4 percent annu..
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $7,100 per month for the next three years, or you can have $5,800 per month for the next three years, alon..
Time Value of Money calculations always use compound interest - You must adjust the interest rate and the number of periods to be consistent with compounding periods.
Why do you think that Pimlico Ltd established the subsidiary in China instead of Japan? Assume no major country risk barriers.
Backwater Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.5 percent. The current yield on these bonds is 7.85 percent. How many years do these bonds have left until they mature?
Corporate income tax/ Meyer Inc has taxable income (earnings before taxes) of 300,000. Calcualte Meyer's federal income tax liability using the tax table . What are the firm's average and marginal taxes?
A stock has an expected return of 15.5 percent, its beta is 1.65, and the expected return on the market is 12.6 percent. What must the risk-free rate be?
Select a product of which you will export to a foreign country. After your product is chosen, decide on a foreign country to which you will export. In developing your Export Business Plan,
Finance Micro Spinoffs Inc. issued 10-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,210. If the firm’s tax bracket is 20%, what is its percentage after-tax cost of debt? Assume a face valu..
A firm's preferred stock is selling for $27.50 a share. The firm nets $25.60 after issuance costs. The stock pays an annual dividend of $3.00 per share. What is the cost of existing, and new, preferred stock respectively?
A particular type of bacteria grows at a rate of 17% per day. If my hyena got infected with 700 bacterium when his leg was cut by barbed wire, how many bacterium will be present in 3 days when I finally decide I need to take the hyena to the veterina..
A stock sells for $30. The next dividend will be $3 per share. If the return on equity ROE is a constant 15% and the company reinvests 40% of earnings in the firm, what must be the opportunity cost of capital?
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