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1. Book Value versus Market Value; Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is $53, 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 $70 million and a coupon rate of 7 percent and sells for 108.3 percent of par. The second issue has a face value of $60 million and a coupon rate of 7.5 percent and sells for 108.9 percent of par. The first issue matures in 8 years, the second in 27 years.
What are the company’s capital structure weights on a book value basis?
What are the company’s capital structure weights on a market value basis?
Which are more relevant, the book or market value weights? Why?
2. Calculating the WACC; In the previous problem, suppose the company’s stock has a beta of 1.15. The risk-free rate is 3.7 percent, and the market risk premium is 7 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%. What is the company’s WACC?
If you wished to withdraw $40,000 in 5 years to buy a Mercedes, how much money would you need to deposit today in Citizens Savings Bank if they pay 12 percent interest (compounded monthly) If you had $24,836.85 to deposit today in Citizens Savings Ba..
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1. the roe ratio tells us how much investors are willing to pay for a dollar of accounting book value. in general
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Which of the following terms has the highest cost of giving up the cash discount, assuming a 365-day year?
There is a debate about stock repurchases whether they are liked by investors or not. Some investors like it because of tax treatments etc. and some other don't because of changes in ownership etc.
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