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Assume that your firm's marginal tax rate is 35% and that your firm has the following capital structure: Bonds coupon rate = 6% yield-to-maturity = 6.5% Market value of bonds = $25 million Book value of bonds = $30 million Common stock Book value of common shares = $25 million Market value of common shares = $50 million Required rate of return (r) = 9.60% What is your firm’s Weighted Average Cost of Capital (report as a percentage, i.e. 10.43%.)?
Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $65 million, ..
Rachel Greene Investors has 500 million shares of common stock outstanding. Rachel is seeing huge growth this year and expects it to continue so, they would like to increase dividends to 47% of earnings. Rachel is also planning on using 30% to repurc..
What is the duration of a bond with a par value of $ 10,000 that has a coupon rate of 3.5 percent annually and a final maturity of two years? Assume that the required rate of return is 4 percent compounded semiannually. What is the duration of a two-..
How long will it take $200 to double if it is deposited and earns the following rates? Round your answers to the closest year. [Notes: (1) This problem cannot be solved exactly with some financial calculators.
After deciding you want a new car, you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a special leasing arrangement where you pay $97 today and $497 per month for the next two years. If yo..
It is January 1. Your firm expects to issue (borrow) three- month Eurodollar time deposits at the beginning of February, May, August, and November in the next year. Explain what position(s) you would take today with FRAs based on three-month LIBOR if..
The H2O-Chemical Company is considering a new production facility on a plot of land that it already owns and it is located near a residential area. The land has a current market value of $1 million and was acquired 4 years ago for $600,000. If this p..
The risk-free rate of return is 5.6 percent and the market risk premium is 13 percent. What is the expected rate of return on a stock with a beta of 1.7?
Kose, Inc., has a target debt–equity ratio of 1.30. Its WACC is 9.3 percent, and the tax rate is 38 percent. If Kose’s cost of equity is 15 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 6.2 percent, w..
Determine the annual financing cost to Clear-field under this arrangement if Clearfield borrows $750,000 and $500,000.
Over the past few years, Microsoft founder Bill Gates' net worth has fluctuated between $20 billion and $130 billion. Manhattan's native tribe sold Manhattan Island to Peter Minuit for $24 in 1626. Now, 387 years later in 2013, Bil Gates wants to buy..
The December 31, 2013, balance sheet of Schism, Inc., showed $153,000 in the common stock account and $2,780,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed $163,000 and $3,080,000 in the same two accounts, ..
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