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Suppose that Brown-Murphies’ common shares sell for $23.50 per share, that the firm is expected to set their next annual dividend at $0.73 per share, and that all future dividends are expected to grow by 5 percent per year, indefinitely. Assume Brown-Murphies faces a flotation cost of 11 percent on new equity issues. What will be the flotation-adjusted cost of equity? (Round your answer to 2 decimal places.)
Cost of equity %
A 4-year annuity of eight $6,200 semiannual payments will begin 6 years from now, with the first payment coming 6.5 years from now. If the discount rate is 7 percent compounded semiannually, what is the value of this annuity 4 years from now?
All else constant, the weighted average cost of capital for a risky, levered firm will decrease if:
If the firm's opportunity cost on savings is 4.9 percent, the savings from using the lockbox are $____ per year?
A $15000 car is bought by paying $2000 down and then equally monthly payments for 3 years at i^(12) = 0.15. What are the monthly payments? Complete the first three lines of an amortization schedule.
The firm is evaluating a project that will add revenues of $325,000 annually for 5 years. The project has $225,000 of annual operating costs (including depreciation). The necessary equipment costs $350,000 and has a five-year life with straight line ..
The personal income tax in the United States is very different from a comprehensive income tax. Discuss how income distribution and resource use would change if a flat-rate tax on comprehensive income were substituted for the current progressive inco..
Consider the following capital market: a risk-free asset yielding 0.75% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 10.75% per year and the expected return on bonds is 3.25% per year. The standa..
Booher Book Stores has a beta of 1.2. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 6%. The market risk premium is 7%. What is the estimated cost of common equity using the CAPM?
A project is estimated to have a net present value equal to $85,000. The risk-adjusted opportunity cost of capital is 15 percent. Which of the following statements is most correct?
Assume that FCF will continue to grow at the growth rate for the last year in the forecast horizon. What is the horizon value at 2017? What is the present value of the horizon value? What is the present value of the forecasted FCF? What is the curren..
What is the proportion of debt financing for a firm that expects a 24% return on equity, a 16% return on assets, and a 12% return on debt? Ignore taxes. A firm has perpetual debt of $10 million at an interest rate of 7%. What is the present value of ..
AIG stock sells at $61.21 and the 6-month 60-strike put is selling at $3.20. The risk-free rate is 4% and the stock will pay a dividend of $0.30 in 3 months. We assume that all options are European-style. What is the theoretical price of the 6-month ..
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