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The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. the firm can sell new $1000 par value bonds with a 15 year maturity at a price of $947 that carry a coupon interest rate of 12.8 percent that is paid semiannually. If the company is in a 34 percent tax bracket, what is the after tax cost of capital to Walgreen for the bonds?
Suppose your client is risk-averse but can invest in only one of the three securities, A, B, or C, in an uncertain world characterized as follows. Next year the economy will be in an expansion, normal, or recession state with probabilities 0.43, 0.31..
Compute the yield to maturity of a $2,500 par value bond with a coupon rate of 7.5% (quarterly payments that is, four times per year) that matures in 25 years. The bond is currently selling for $3,265.rounded to one decimal place.
Sigma Company has the following capital structure: 45% debt, 15% preferred stock and 40% common stock. Determine the weighted average costs of capital given the following information. Ignore floatation costs. Assume a tax rate of 35%.
A stock has an expected return of 18 percent, its beta is 1.45, and the risk-free rate is 4 percent. What must the expected return on the market be?
How do you think the yield curve will change during this time? Offer some logic or current reference(s) to support your answers.
Market value will be 60 millions. During the year company will raise and invest 20 million in new projects. The firm presents value capital structure described below. No short -term debt. Debt: 30,000,000 Common equity: 30,000,000 and Total equity: 6..
Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..
During the past year, the consumer price indexes (CPI) of the United States and the Eurozone rose by 1 percent and 3.5 percent, respectively. If PPP holds, what is the percentage change in the value of the EUR over the same time period? (use p.pp%)
Suppose “s” (the fraction of your wealth put into stocks) is 0.8 and that stocks have a return of 25 percent. If the return on bonds is 3 percent, what is the return on your wealth?
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and cost of capital of 11%. What is the project's NPV? Payback: refer to the problem, what is the project's payback period?
A $1,000 bond is issued paying 8% interest semi-annually for 15 years while the market is paying 7% for similar bond issues. What price would investors expect to pay for the bond?
What monetary and fiscal policies might be prescribed for an economy in a deep recession and choose an industry and identify the factors that will determine its performance in the next 3 years. What is your forecast for performance in that time per..
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