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You are the manager or The Upper Tier, a company that has a target debt-equity of rate of 0.45. The company is considering a project with an initial investment of $1,000,000. The present value of the future cash flows of the project is $1,050,000. The cost of floating equity is 9.5% and the floatation of debt is 6.6%
What should the firm use as their weighted average floatation cost?
If the firm has to invest $1,000,000 in the project how much money does it have to raise (round to nearest dollar?)
Will you invest in the project if (a) there were no floatation costs and (b) there were floatation costs?
Youngston Company (a Utah employer) wants to give a holiday bonus check of $750 to each employee. Since it wants the check amount to be $750, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of th..
Companies make bonds callable A. In the event interest rates increase. B. In the event interest rates drop. C. To protect the buyers of the bond in the event the company goes bankrupt. D. So the bond can be converted to common stock. E. A or B could ..
Determine the profits and graph the results. Identify the two breakeven stock prices and the maximum and minimum profits.
Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $940 2 1,090 3 1,340 4 1,405 Required: (a) If the discount rate is 8 percent, what is the future value of these cash flows in year 4? (b) What is the..
Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates.
Opportunity Cost of Capital: Explain why we refer to the opportunity of cost of capital, instead of just "cost of capital" or "discount rate." While you're at it, also explain the following statement: "the opportunity cost of capital depends on the p..
All of the following are methods of evaluating the risk of a project except which one?
Three years ago, the Morgan Co. issued 15-year, 6.5 percent semiannual coupon bonds at par. Today, the bonds are quoted at 100.6. What is this firm's pretax cost of debt?
bullwhat is net present value npv how is it calculated and what is the basic premise of its decision rule?bullwhat is
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $72,000 per year for the next two years, or you can have $61,000 per year for the next two years, along wi..
Consider the following capital market: a risk-free asset yielding 0.75% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 10.75% per year and the expected return on bonds is 3.25% per year. What is th..
Suppose that the tax rate on asset income is Tc and tax is leived on nominal interest income. Assume that the tax applies to the real returns on capital. what is the after tax real interest rate on bonds? consider permanet, unanticipated increase in ..
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