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Assuming a target capital structure of: 40% debt 20% preferred stock 40% common equity What would be the WACC given the following: all debt will be from the sale of bonds with a coupon of 10% (assume no flotation costs), preferred stock's associated cost will be 13%, and common equity will be from retained earnings with an associated cost of 15%. The tax rate for this corporation is 30%.
Which one of the following will cause the sustainable growth rate to equal to internal growth rate?
The Lo Sun Corporation offers a 6.0 percent bond with a current market price of $788.50. The yield to maturity is 8.40 percent. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?
You are bullish on GE and expect a rise in its share price in one year. Since you have only $10,000 available, you want to get a margin loan. The annual interest rate on margin loan is 4% and your broker requires a maintenance margin of 35%. If you b..
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)? Worked this many ways by many suggestions and I am not ..
A company leases equipment for 7 years. The equipment costs $28,000 and the owner wants to earn 9.5% on the lease. What should be the required lease payments?
Atlantis Fisheries issues zero coupon bonds on the market at a price of $417 per bond. Each bond has a face value of $1,000 payable at maturity. What is the yield to maturity of the bond? (Assume semi-annual coupon payments unless it is explicitly st..
When the Bell System was broken up, the old AT&T was split into a new AT&T in addition to seven regional telephone companies. The specific reason for forcing the breakup was to increase the degree of competition in the telephone industry. Do you thin..
You borrow $75,000 for 30 years at 11% interest compounded annually. The value of the property is $100,000, PGI= $20,000, vacancy rates are 8%, and operating expenses are $81,000. What is the Mortgage constant? Please show me the work as well so I ca..
Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 15.25 percent per year. The bank uses daily compounding on its loans.
You are a banker who has been approached by this company to borrow a sum of money (you decide how much, and why). Based on the company's financials and its future business prospects, would you loan the money? Why or why not.
If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues constant. its beta will be unaffected, since beta does not measure the sensitivity of the project's cash flows to market risk.
Garner-Wagner is considering investing in a project that requires an investment of $3,000,000. The project will generate a cash inflow of 500,000 per year for the next 5 years. The cost of capital is 10%. What is the project's net present value?
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