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RRM Incorporated has just declared a dividend of $10.25 per share. The tax rate of dividends is 20 percent. The tax rate on capital gains is zero. The tax laws require the taxes to be withheld when the dividend is paid. RRM currently sells for $107 per share and the stock is about to go ex-dividend. What do you calculate the ex-dividend price will be?
98.80
96.75
93.80
Deng Inc. has a target debt-equity ratio of 0.4. It’s before-tax cost of equity is 16 % and it’s before-tax cost of debt is 8%. If the tax rate is 32%, what is Deng’s WACC?
Discuss how derivatives could be used to hedge this risk. Explain and provide examples if possible and calculate the appropriate number of bond and equity futures that should be sold.
As a financial manager, what can you do to make sure your company stays solvent and is not too liquid? How do you determine if the company has too much liquidity?
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $8.4 milli..
Buckeye Corp. is currently an all-equity firm with a market value of equity of $100 million. The current expected return on Buckeye's equity is 20%. Buckeye is planning on issuing $50 million in debt with an interest rate of 8% and using the cash to ..
Explain mutual funds. Explain three advantages to buying mutual funds over individual stocks. Please explain the difference between an actively traded fund vs. and indexed fund.
An investment of $100,000 is set up in a trust, earning 8% per year. Annual disbursements of $10,000 are made at the end of the first 10 years. If after 10 years the annual disbursements are adjusted so that they may be made indefinitely, the perpetu..
Suppose that a bank's sole business is to lend in two regions of the world. The lending in each region has the same characteristics as in Example 23.5 of Section 23.8. Lending to Region A is three times as great as lending to Region B. The correlatio..
A stock has a beta of 1.28 and an expected return of 12.6 percent. A risk-free asset currently earns 4.2 percent. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations.
Finco must determine how much investment and debt to undertake during the next year
Thirsty Cactus Corp. just paid a dividend of $2.40 per share. The dividends are expected to grow at 16 percent for the next eight years and then level off to a growth rate of 6 percent indefinitely. If the required return is 15 percent, what is the p..
Compute Ms. Barth's preparer penalty if the IRS concludes that: a. Ms. Barth had no reasonable legal basis for claiming the deduction and was not acting in good faith by doing so. b. Ms. Barth intentionally disregarded the tax law by claiming the ded..
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