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The common stock and debt of Northern Sludge are valued at $66 million and $34 million, respectively. Investors currently require a return of 15.6% on the common stock and 8.1% on the debt. If Northern Sludge issues an additional $17 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
New return on equity =
You own a stock portfolio invested 30 percent in Stock Q, 25 percent in Stock R, 10 percent in Stock S, and 35 percent in Stock T. The betas for these four stocks are 1.47, 0.85, 0.63, and 1.14, respectively. What is the portfolio beta?
Crazee Enterprises Corporation just paid a dividend and it expects that dividend to grow by 10 percent for the next three years. After that, the dividend is expected to grow at a constant rate of 5 percent in perpetuity. If the company's stock is cur..
Each financial decision made by a corporate manager can be evaluated by its direct impact on the corporation's stock price.
The annual returns on AAA stocks are normally distributed with an average historical return of 17.3% and a standard deviation of 33.4%. What is the probability that annual return on small-company stocks is between 10% and 30%?
Assuming you expect slower economic growth than the average investor, and assuming you also forecast annual inflation of 1.5% over the next 30 years, explain whether stock investments are likely to perform well in that environment.
Why can this population growth scenario be considered an ordinary annuity? What will the population be at the end of 12 years of such growth? What if the town actually started out at the beginning of year 1 with 500,000 residents? What would be the p..
Bell Weather Goods has several proposed independent projects that have positive NPVs. However, the firm cannot initiate any of the projects due to a lack of financing. This situation is referred to as:
On October 1, 2013, Chief Corporation declared and issued a 14% stock dividend. Before this date, Chief had 89,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a res..
What is the relationship between discounting and compounding? What is the relationship between the present-value factor and the annuity present-value factor? What is an annuity due? How does this differ from an ordinary annuity? What is the present v..
What part of finance is concerned with design and delivery of advice and financial products to individuals, business and government?
In 2013 Caterpillar Inc. had about 652 million shares outstanding. Their book value was $31 per share, and the market price was $85.50 per share. The company’s balance sheet shows that the company had $21.7 billion of long-term debt, which was curren..
Kaelea, Inc., has no debt outstanding and a total market value of $153,000. Earnings before interest and taxes, EBIT, are projected to be $9,500 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 perc..
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