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Suppose you borrow $13000 when financing a tea shop which is valued at $48000. Assume that the unlevered cost equity of the coffee shop is 15% and that the cost of debt is valued at 8%.
a. What is the value of equity of the tea shop?
b. What is the value of debt next period for the tea shop?
c. What is the value of the cash flow next period for the tea shop?
d. What is the average cost of capital of the tea shop?
e. What is the cost of equity of the tea shop?
Jack and Hope are thinking of purchasing a house. The house costs $320,000 and they have saved $80,000 as a down payment. The rest will be secured by a mortgage. Calculate the monthly payments if they are made at the beginning of the month rather tha..
Large cap stocks had the nominal rates of return of 11.89%. The rate of inflation during the last year was 2.57 percent. What is the real rate of return for large cap stocks.
You bought a GMC bond for $50,000 on August 1, 2005, that redeems at par value on July 31, 2011. The stated bond rate is 6% annually and the interests are paid monthly. An investor is willing to buy the bond but he/her wants to have a minimum return ..
A noncallable Treasury bond has a quoted yield of 5.23 percent. It has a 6.2 percent coupon and 14 years to maturity. a. What is its dollar price assuming a $1,000 par value? (Round your answer to 2 decimal places. Omit the "$" sign in your response...
Calculate all four terms of the DuPont Identity and present the results but do not analyze the results. If you were the appropriate financial manager of one of the firms that you analyzed, what would be your observations and recommendations?
Mark would like to purchase a stock priced at $70. The stock is not expected to pay any dividends in the coming year. Mark can either put up the entire amount and purchase the stock, or borrow half of the investment amount from his brokerage firm at ..
How do U.S. laws define insider trading? What are the effects and complexities involved of insider trading? Research and summarize a real case of insider trading and its resolution, if any.
Suppose that your bank buys a T-bill yielding 4 percent that matures in six months and finances the purchase with a three-month time deposit paying 3 percent. The purchase prince of the T-bill is $3 million financed with a $3 million deposit. Calcula..
Gilmore, Inc., had equity of $215,000 at the beginning of the year. At the end of the year, the company had total assets of $370,000. During the year, the company sold no new equity. Net income for the year was $45,000 and dividends were $6,600. What..
You inherit $1,000,000 in 30 years. What is that money worth today if inflation averages 3% per year? How about if inflation averages 4% instead? Assume annual compounding. Show work.
A firm is considering a project with a 5-year life and an initial cost of $135,000. The discount rate for the project is 13%. The firm expects to sell 2,400 units a year for the first 3 years. The cash flow per unit is $20. What is the net present va..
Your firm has an average collection period of 36 days. Current practice is to factor all receivables immediately at a discount of 1.7 percent. What is the effective cost of borrowing in this case?
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