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A firm with a corporate wide debt-to-equity ratio of 0.5, an after cost tax of debt of 7 %, and a cost of equity capital of 15% is interested in pursuing a foreign project. The debt capacity of the project is the same as for the company as a whole, but its systematic risk is such that the required rate on equity is estimated to be about 12%. The after tax cost of debt is expected to remain at 7%. What is the project’s weighted average cost of capital? How does it compare with the parent’s WACC?
A bond that settles on June 7, 2013, matures on July 1, 2033, and may be called at any time after July 1, 2023, at a price of 146. The coupon rate on the bond is 6.8 percent and the price is 160.00. What is the yield to maturity and yield to call on ..
You placed $3722 in a savings account today that earns an annual interest rate of 19.72 percent compounded semi annually. How much will you have in this account at the end of five years? Assume that all interest received at the end of the period is r..
The dividend exclusion for corporations receiving dividends from another corporation has resulted in
Capital Foods purchased an oven 5 years ago for $45,000. The oven is being depreciated over its estimated 10 year life using the straight line method to a salvage value of $5,000. Capital is planning to replace the oven with a more automated one that..
Nevertheless, Ms. H did make an error in her favor. When she received formal notification that she owed an additional $4,350 tax, she was dismayed that the IRS also billed her for $920 interest on the deficiency. She doesn't understand why she must p..
Central Systems, Inc. desires a weighted average cost of capital of 9 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted aver..
Cooling Tools, Inc. is currently producing 978 of small refrigerators per month but the company’s CEO plans to increase production at a rate of 7.60 percent per month until the firm is producing 5,555 of refrigerators per month. How many months will ..
Traditionally, Granite Company has accepted a proposal only if the payback period is less than 50 percent of the asset's useful life. Peggy Casteel is the new accounting manager. Determine the payback period of the investment. Determine the net prese..
Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?
Energy Tech company issued an 8% (semi-annual payment) 20 year bond 5 years ago. If the yield of similar bond today is 6%, what is the bond price? What is the current yield?
Choose one stock index (or one sector index) and one bond index. Go to yahoo/Finance and download 5 years of monthly data into your Excel for each stock index (Sector index) and bond index. Calculate the monthly rate of return (P1-P0/P0) for stock an..
What is the beta of your portfolio
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