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Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.8, 1.0, 1.5, and 1.7, respectively. Assume all current and future projects will be financed with 50 percent debt and 50 percent equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 6 percent) is 14 percent and the after-tax yield on the company’s bonds is 7 percent. What will the WACCs be for each division? (Round your answers to 2 decimal places.) WACCs Division A % Division B % Division C % Division D %
On the basis of your analysis, shoul Karen recommen that the bank extend the existing short- and long- term loans and grant the additional $6,375,000 loan, or that the bank demand immediate repayment of all existing loans? If she does recommend conti..
Caan Corporation will pay a $3.02 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock..
Little Books Inc. recently reported $12 million of net income. Its EBIT was $20.4 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $15 per share dividend 10 years from today ..
The Smith family was traveling on their summer vacation from Massachusetts to Wyoming. Along the way, the family was involved in an accident when they proceeded to drive through an intersection; Is Mr. Smith correct? Where could he sue Mr. Jones? Ex..
What statement about spot and forward exchange rates is correct and calculate the AUD/JPY cross rate when the following FX spot rates are quoted
uppose John short sells (=writes) Apple put option to Mary. Is this identical to John buying Apple call option from Mary? Please explain in detail why they are the same or different. A company enters into 5 long January futures contracts of wheat. Th..
A video store (AVS) runs a series of fairly standard video stores. Before a video can be put on the shelf, it must be catalogued and entered into the video database. Every customer must have a valid AVS customer card in order to rent a video. Custome..
Muffin’s Masonry, Inc.’s, balance sheet lists net fixed assets as $30.00 million. The fixed assets could currently be sold for $51.00 million. Muffin’s current balance sheet shows current liabilities of $13.50 million and net working capital of $12.5..
Starware Software was founded last year to develop software for gaming applications. The founder initially invested $1,000,000 and received 12 million shares of stock. What will the value of the whole firm be after this investment? (the post-money? v..
Michael is a Professor of Biology at DeVry University and has collected "30" largemouth bass from "4" separate lakes to get weight distributions, measure of girth, and length. Given the Professor's needs, summarize how he can consolidate this data to..
questionpart aa number of investigations have been undertaken into use made by shareholders of the annual reports of
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