Shares of common stock outstanding with a market price

Assignment Help Financial Management
Reference no: EM13942934

A firm has 2,000,000 shares of common stock outstanding with a market price of $2 per share. The firm also has 2,000 bonds outstanding with a market value of $1,200 per bond. The bonds have a 10% coupon rate (semi-annual coupons) and mature in 15 years. The firm’s beta is 1.2, the T-bill rate is 5%, and the market risk premium is 7%. If the tax rate is 34%, what is the WACC?

Reference no: EM13942934

Questions Cloud

Determine the market value of the bond : A corporate bond has a face value of $1000 with maturity date 20 years from today. The bond pays interest semi annually at a rate of 8% per year based on the face value. The interest rate paid on similar corporate bonds has decreased to a current rat..
Treasury offers to sell you a bond : Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until the bond matures 15 years from now, at which time it will be redeemed for $5,600. What interest rate would you earn if you bought this bond at the offer pr..
Expected return-what must the risk-free rate be : A stock has an expected return of 15 percent, its beta is 1.35, and the expected return on the market is 12 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)
What is the company cost of equity : The Down and Out Co. just issued a dividend of $2.96 per share on its common stock. The company is expected to maintain a constant 7 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company's cost of ..
Shares of common stock outstanding with a market price : A firm has 2,000,000 shares of common stock outstanding with a market price of $2 per share. The firm also has 2,000 bonds outstanding with a market value of $1,200 per bond. The bonds have a 10% coupon rate (semi-annual coupons) and mature in 15 yea..
Expects non normal dividend growth over the next three years : Louis incorporated expects non normal dividend growth over the next three years; that is a 10% growth rate in the first year, then 20%, and then 25% followed by growth of 5% thereafter. If the last dividend paid was $.25 and the appropriate discount ..
What is the bonds price : ABC Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The market requires an interest rate of 7.5% on these bonds. What is the bond's price?
Currently the risk free rate and market premium : Currently the risk free rate is 1% and the market premium is 3%. Given this information, which of the following statements is correct?
What rate of return is built into the annuity : Suppose you just won the state lottery, and you have a choice between receiving $2,075,000 today or a 15-year annuity of $300,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

Reviews

Write a Review

 

Financial Management Questions & Answers

  Most recent dividend per share paid on the stock

Teder Corporation stock currently sells for $30 per share. The market requires a 13.5 percent return on the firm's stock. If the company maintains a constant 8 percent growth rate in dividends, the most recent dividend per share paid on the stock was..

  Common equity capital-Holding everything else constant

S. Girard Inc. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower cost..

  What is probability of observing five operational risk event

What is the probability of observing five operational risk events in a single year for the 2000-2007 period?

  What will be the price of the bond

XYZ has a $1,000 Face Value 5% Coupon Bond (paid semi-annually). The bond is selling for $949 today and matures in 8 years. (The YTM today is 5.8%) A) What will be the price of the bond in 1 year if the YTM investors demand is still 5.8%? $_________?..

  Total revenues and net income

Total revenues and net income for 2011 for Lake Corporation is $3,500,000 and $280,000 respectively. Lake Corporation has had 400,000 common shares of stock outstanding for all of 2011. The selling price of smith lake corporation common stock on Dece..

  Sales to justify introduction of the new credit policy

Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. The manager of the firm doubts wh..

  How will your expected euro amount of receivables

How will your expected euro amount of receivables from the Japanese transaction be affected (if at all) by the news that occurred this afternoon? Explain.

  How many shares must he sell to create a homemade dividend

A firm has $500 million of assets that includes $50 million of cash and 10 million shares outstanding. The firm uses $50 million of its cash to pay dividends. If an investor has 1000 shares, how many shares must he sell to create a homemade dividend ..

  Stock to reduce the tax liability on this gain

Irma and Dave Cedeno have a potential $2,000 capital gain on stock they have owned 11 months. They are in the 28 percent marginal tax bracket. How much longer would they have to hold this stock to reduce the tax liability on this gain?

  Discount rate while evaluating all its domestic projects

DDD uses constant 12% WACC as discount rate while evaluating all its domestic projects. What do you foresee happening with its WACC in the next five years?

  Calculate the total return and not worry about how

Suppose that a security costs $1,500 today. a Calculate the percentage return on the security if the payoff to the security in one year is $1,000, $1,500, $2,000, or $2,500.

  How much money will you have on the date of last payment

A friend owes you money. He offers to pay you $1,000 today, $1,000 a year from now and $1,000 exactly two years from now. If 10% is the prevailing rate you expect on your investments, what is the present value of this arrangement? He offers to pay yo..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd