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A firm has determined itsoptimal capital structure, which is composed of the following sources and target market value proportions:
Long-term debt 30%
Preferred stock 5
Common stock equit 65
Debt: The firm can sell a 20-year, $1000 par value, 9 percent bond for $980. A floatation cost of 2 percent of the face value would be required in addition to the discount of $20.
Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The cost of issuing and selling the stock is $3 per share.
Common Stock: The firm's common stock is currently selling for $40 per share. The divident expected to be paid at the end of the coming year is $5.07. Its divident payments have been growing at a constant rate for the last five years. Five yars ago, the divident was $3.45. It is expected that to sell, a new common stock issue must be underpriced at $1 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm's marginal tax rate is 40 percent.
Calculate the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings.
Monicaclinton Ltd., a wholesale importer, is in the process of issuing $6,000,000 of 12% coupon debt with a maturity of 5 years. A sinking fund must be established to retire 60% of the issue prior to maturity.
Depreciation was $6,700 and interest paid was $2,480. A net total of $2,600 was paid on long-term debt. The firm spent $24,670 on fixed assets and decreased net working capital by $1,330.
A)calculate the future value of $6,000, given that it will be invested for 5 years at an annual interest rate of 6 percent. B) recalculate part (a) using a compounding period that is semiannual (every 6 months).
What is the cost of retained earnings if the long-term growth rate in dividends for the firm is expected to be 8%
Trigen Corp. management will invest cash flows of $1,263,837, $548,573, $1,448,382, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years.
The financial manager of the firm is considering two choices regarding dividends: i. Paying out all earnings as dividends, or ii. Starting from year 0, investing 20% of its earnings each year in projects which earn..
During the year he has a net loss of $17,300 from renting the home. His other sources of income during the year were a salary of $120,000 and $12,700 of long-term capital gains.
A 5-year car loan for $50,000 with equal semi-annual payments. The loan requires no payments in the first year, i.e., the first payment is in 18 months, but interest continues to accrue during this period.
Your sister turned 35 today, and she is planning to save $5,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that will provide a return of 8% per year.
Giant has preferred stock selling for 125 percent of par that pays a 10 percent annual coupon. What would be Giant's component cost of preferred stock
Consider three zero-coupon bonds with 2, 10, and 30 years to maturity and with required yields 4%, 7%, and 9%, respectively. Calculate the price and modified duration of the three bonds using annual compounding.
Your coin collection contains fifty-four 1941 silver dollars. Your grandparents purchased them for their face value when they were new. These coins have appreciated at a 10 percent annual rate
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