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Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help this, compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or a coupon interest rate of 12.2%. The bond is currently selling for a price of $1,129 and will mature in 10 years. The firm's tax rate is 34%. b. If the firm's bonds are not frequently traded how would you go about determining a cost of debt for this company? c. A new common stock issue that paid $1.78 dividend last year.
The par value of the stock is $16 and the firm's dividends per share have grown at a rate of 8.9% per year. The growth rate is expected to continue in the foreseeable future. The price of the stock now is $27.56. d. A preferred stock paying a 13.1% dividend on $122 par value. The preferred shares are currently selling for $150.55. e. A bond selling to yield 12.1% for the purchaser of the bond. The borrowing firm faces a tax rate of 34%.
What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value(at retail)?
A corporation is attempting to raise $5,000,000 in new equity with a rights offering. The subscription price will be $40 each share. The stock currently sells for $50 each share and there are 250,000 shares were outstanding.
Assume that the inflation rate in united States is 4 percent and in Canada it is 5 percent. What would you expect is happening to the exchange rate between United States and Canadian dollars?
Which of the following is not a component of the Gordon (or constant dividend growth rate) model for valuing stocks?
Rumors about potential mergers are often a hot topic in the business press. One rumor being floated around recently is a potential merger between mobile phone giants T-Mobile and Sprint.
You own a stock portfolio invested 25 percent in stock Q, 20 percent in stock R, 15% in stock S, and 40% in stock T. The betas for these stocks are .84, 1.17, 1.11, and 1.36 respectively.
Who are the main users of financial statements? Does each user look for the same information? Explain and give examples.
What is the WACC prior to the expansion? After the expansion? Why would leverage cause the increase in the cost of debt.
Varian corp. has three outstanding long-term debt issues. One issue has only four years left until maturity. These bonds have a face value of $1000 , pay a 12.2% annual coupon, and currently sell for 1024. What is Varian's cost of debt for this bo..
Computation and explain the arbitrage opportunity and what would you do as an arbitrager and when would you stop doing it
How much new long-term debt financing will be needed in 2012? Round your answer to the nearest cent. (Hint: AFN - New stock = New long-term debt.)
Explain why do corporations buy back their own stock? What does it tell you about the corporation? What effect does the purchase have on the price of a company's stock?
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