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Jiminy’s Cricket Farm issued a bond with 10 years to maturity and a semiannual coupon rate of 10 percent 4 years ago. The bond currently sells for 94 percent of its face value. The company’s tax rate is 38 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 55 percent of par. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) Total book value $ What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) Total market value $ What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of debt %
Now assume that Wendt does not receive the interest income but does receive an Additional $1 million as dividends on some stock it owns. What is the tax on this dividend income?
Nonconstant Growth Valuation A company currently pays a dividend of $3.5 per share (D0 = $3.5). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, then at a constant rate of 8% thereafter. What is yo..
The one-year futures price on a particular stock-index portfolio is 406, the stock index currently is 400, the one-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $400 investment in the index portfolio is $5. Form..
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge on this inventory by selling 6 futures contracts at 9.56. The futures contracts are based on 112,000 pounds and quoted in cents per pound. At the time the fi..
Do you think finance departments are the best place to train future CEOs? Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years.
What are the total costs?
You just purchased a bond that matures in 16 years. The bond’s par value is $1,000, and you purchased the bond for $1,050. The bond’s issuer pays interest annually at the end of each year. The bond’s current yield is 6.25%. What is the bond’s yield-t..
Some experts argue that people should be allowed to hire Judges to resolve their disputes. Just like they can hire an attorney, they can hire a Judge. Currently, Judges are appointed by the Judicial branch for a period of time. Does the use of privat..
Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 50; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. What would be the effective cost of that cre..
Anle corporation has a current stock price $20 and is expected to pay a dividend of $1 in one year. Its expected stock price right after paying that dividend is $22. How much of Anle's equity cost of capital is expected to be satisfied by dividend yi..
Net working capital investments of $50,000, $75,000, and $85,000 are expected at the end of years 1, 2, and 3 respectively. Calculate the expected net cash flows for year 3.
The market and stock J have the following probability distributions: Calculate the expected rates of return for the market and stock J.
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