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Your firm is planning to issue preferred stock. The stock is expected to sell for $97.06 a share and will have a $100 par value on which the firm will pay a 14.4 percent dividend. What is the cost of capital to the firm for the preferred stock?
1.what are financial ratios and why are they useful?2.what are the three types of comparisons that can be made when
Burklin, Inc., has earnings of $18.6 million and is projected to grow at a constant rate of 4 percent forever because of the benefits gained from the learning curve. Currently, all earnings are paid out as dividends. Estimate the value of the stock. ..
Baker decided not to pursue limit pricing as described in the previous problem. Now they find themselves with a competitor, which limits their profit to $4 million per year. Ignoring legal considerations, is predatory pricing a profitable strategy? W..
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $495,000 is estimated to result in $194,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Ta..
Last year your firm had revenue of $27.5 million, cost of goods sold (COGS) of $14.0 million, Selling, General, & Administration costs (SG&A) of $2.5 million, Account Receivables (AR) of $8.5 million, Account Payables (AP) of $7.0 million and Invento..
Suppose the spot rates for 1 and 2 years are s1=6.3% and s2=6.9% with annual compounding. Recall that in this course interest rates are always quoted on an annual basis unless otherwise specified. What is the discount rate d(0,2)?
Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum-variance portfolio has a standard deviation that is always _________.
A gold futures contract with current price $650 has a maturity of two years. If the T-bill rate is 4%, what should the futures price be?
The Fed makes an open-market purchase of $5 million in an economy in which no bank holds excess reserves and the assumptions of the simple multiplier hold with a reserve requirement of 8 percent. Draw up the bank's balance sheet and calculate the ban..
Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. At what level of pretax cost ..
Jones and Clark entered into a written contract for the purchase of an apartment building by Clark. The contract was carefully drafted to set forth the agreement of the parties. It was signed by both parties. Clark subsequently claimed that the contr..
An unlevered firm has a value of $700 million. An otherwise identical but levered firm has $130 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax r..
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