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The O.K. Railroad needs to raise $9.5 million for capital improvements. One possibility is a new preferred stock issue - 8 percent dividend, $100 par value - stock that would yield 9 percent to investors. Flotation costs for an issue this size amount to 5 percent of the total amount of preferred stock sold. These costs are deducted from gross proceeds in determining the net proceeds to the company. (Ignore any tax considerations.)
a. At what price per share will the preferred stock be offered to investors? (Assume that the issue will never be called.)
b. How many shares must be issued to raise $9.5 million for the O.K. Railroad?
RAK Co. wants to issue new 19-year bonds for some much-needed expansion projects. The company currently has 6 percent coupon bonds on the market that sell for $1,080, make semiannual payments, and mature in 19 years. What coupon rate should the compa..
A single machine work center has five jobs assigned to it. They are labeled, in the order of their arrival in the shop, as jobs A, B, C, D and E.
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A local dental practice decides to run a Groupon campaign. The campaign offered $345 worth of dental services (such as teeth whitening) for $140. For the total campaign, 250 coupons were sold. Calculate the Groupon campaign profit/loss
A maturity date of October 22, 2012:- What was the bond's current yield?- Why is the bond's yield to maturity less than its coupon rate?
For the following set of terms, state whether you should take the cash discount or pay at the end of the credit term period assuming your investment rate is 10 percent.
What are major considerations when a firm considers using debt or equity capital to finance its investment projects? Continental Airlines filed for bankruptcy, at least in part, as a means of reducing labor costs. Who benefits and loses from the bank..
A firm has debt of $11.3, a leveraged firm value of $28.6, a pre-tax cost of debt of 9.2 percent, a cost of equity of 18.1 percent, and a tax rate of 34 percent. What is the firm's weighted average cost of capital? Show your answer to the nearest .1%..
Forward Contract. The Wolfpack Corporation is a U.S. exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will appreciate against the dollar in the future, should it hedge its exports with a forward..
You take out a 30-year $300,000 mortgage loan with an APR of 8 percent and monthly payments. What are the monthly payments? In 16 years you decide to sell your house and payoff the mortgage. What will the principal balance on the loan be? What will y..
Explain why an MNC may invest funds in a financial market outside its own country. Explain why some financial institutions prefer to provide credit in financial markets outside their own country.
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