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You are given the following information for Watson Power Co. Assume the company’s tax rate is 35 percent. Debt: 6,000 6.7 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 390,000 shares outstanding, selling for $57 per share; the beta is 1.13. Preferred stock: 17,000 shares of 4 percent preferred stock outstanding, currently selling for $77 per share. Market: 6 percent market risk premium and 4.7 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Assume that in 2009, a Morgan silver dollar minted in 1888 sold for $7,450. What was the rate of return on this investment?
Define the minimum variance hedge ratio and the measure of hedging effectiveness? What do these two values tell us?
Roy Gross is considering an investment that pays 6.10 percent, compounded annually. How much will he have to invest today so that the investment will be worth $28,000 in six years?
Barnes Enterprises has bonds on the market making annual payments, with 15 years to maturity, a par value of $1,000, and a price of $966. At this price, the bonds yield 7.8 percent. What must the coupon rate be on the bonds?
Discuss what impact each of the following will have, in general, on EVE sensitivity to a change in interest rates. Consider two cases where rates rise sharply and fall sharply. a. Bank owns a high percentage of assets in bonds that are callable anyti..
One More Time Software has 9.4 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 120.2 percent of par. What is the current yield on the bonds? The effective annual yield?
Lissa Co.'s stock price is currently $30.25. A 6-month call option on Lissa.'s stock has a strike price of $25 and has an expected volatility of 40% (i.e., expected standard deviation = 40%). The risk-free rate is 6%. According to the Black-Scholes o..
The gain from a one-year project is uniformly distributed between -$2 million and +$8 million. What is the one-year 99% value at risk? What is the one-year 99% expected shortfall?
You purchase 200 shares of stock at $100 ($20,000); the margin requirement is 30 percent. What are the dollar and percentage returns if you sell the stock for $112 and buy the stock for cash? you sell the stock for $60 and buy the stock on margin?
Madison Corporation has a $1000 par value bond outstanding paying interest of 7%. The bond matures in 20 years. If the present yield to maturity for this bond is 8%, calculate the current price of the bond. The coupon (interest) payments are paid sem..
You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –26.7 percent, 14.8 percent, 32.6 percent, 2.9 percent, and 21.9 percent. What was the arithmetic average return on the stock over this five-year period? W..
Suppose that Intel currently is selling at $64 per share. You buy 500 shares using $20,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. What is the percentage increase in the ne..
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