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Filer Manufacturing has 8.1 million shares of common stock outstanding. The current share price is $51, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $69.6 million and a coupon rate of 6.8 percent and sells for 108.5 percent of par. The second issue has a face value of $59.6 million and a coupon rate of 7.3 percent and sells for 108.5 percent of par. The first issue matures in 8 years, the second in 27 years.
Suppose the company’s stock has a beta of 1.2. The risk-free rate is 2.9 percent, and the market risk premium is 6.8 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The balance sheet of Innovative Products reports total assets of $590,000 and $790,000 at the beginning and end of the year, respectively. The cash return on assets for the year is 25%. Calculate Innovative Products’ net cash flows from operating act..
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $34,000 per month for 20 years, with the first payment received 30 years and 1 month from now.
Consider two mutual funds, A and B. The beta for fund A is .60, and the standard deviation of the rate of return = .20. The beta for fund B. is 1.30 and its standard deviation of the rate of return = .325. The standard deviation of the market portfol..
Yet, they sometimes close the facility later because the cost advantage dissipates. Why do you think the relative cost advantage of these countries is reduced over time?
Safelife insurance company has $85 million in assets, $80 million in liabilities, and $5million in shareholders' equity. The duration of liabilities is 3. If Safelife wants to immunize its net worth against interest rate risk (i.e. set the duration o..
Next year you will repeat this study. Determine the sample size necessary to estimate, with 95% confidence, the population percentage to within plus and minus 0.02 or 2%.
Among the assets in a decedent’s gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. What amount of closely held corporate ..
Do you believe that this is a fair test? Why or why not? If you are asked to review the employee selection procedures, would you make any changes to this system? Why or why not?
The company C is considering the acquisition of a new machine that will last for 20 years. The machine costs $500,000 and belongs to CCA class 8 (CCA rate : 20%). The machine would require an investment in net working capital of $25,000 in year 1.
Your company has spent $500,000 on research to develop a new computer game. The firm Is planning to spend $100,000 on a machine to produce the new game. The firm has a tax rate of 35 percent, an opportunity cost of capital of 10 percent, and it expec..
A Plastic company, Inc., Plastic grading company and Plastic extraction, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given as of today. Facts Existing Machine proposed machin..
Which of the following describes the dollar amount assigned to a piece of real property for the purpose of estimating taxation?
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