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Big Bass Sound (BBS) is a thriving music business. You would like to understand the market risk of BBS and are looking to find its Beta of the Assets. BBS' Beta of Equity is 3, the beta of debt is 0.3, and the tax rate is 32%. BBS has 169 in debt outstanding and a market value of equity of 217, what is the Beta of Assets? (Please show at least two decimal places)
Which one of the following will occur if a bond's discount rate is lowered?
Ablemarle Energy recently raises (borrowed) $50 million by issuing an innovative new bond that is being referred to as a “Biennial” bond. The Biennial bonds, which have a par value of $1000, make an interest payment of $100 once every two years in pe..
Duchon Industries had the following balance sheet at the time it defaulted on its interest payments and filed for liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $900 mil..
A0*/S0 = 1.6; L0*/S0 = 0.4; profit margin = 0.10; and dividend payout ratio = 0.45, or 45%. Sales last year were $100 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm’s self-supporting growth rate—i..
Mudpack, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 20 percent debt. Currently, there are 16,000 shares outstanding, and the price per share is $83. EBIT is expected to rem..
lectronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. How will this proposal affect the stock price? How will it affect the value of the company? How will a share repurchase affect..
A bond that pays interest annually yields a rate of return of 5.75 percent. The inflation rate for the same period is 3 percent. What is the real rate of return on this bond?
EMC Corporation has never paid a dividend. Its current free cash flow of $370,000 is expected to grow at a constant rate of 4.6%. The weighted average cost of capital is WACC = 11.5%. Calculate EMC's estimated value of operations. Round your answer t..
The stock of Big Joe's has a beta of 1.66 and an expected return of 13.40 percent. The risk-free rate of return is 5.9 percent. What is the expected return on the market?
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 $12 per share dividend 10 years from today ..
Assuming IBM’s historical “LT (Long-term Debt/Equity) is 100 percent, how does it currently stand? Generally speaking, is that good or bad? Assuming its historical return on assets is 10 percent, how does it currently stand? Generally speaking, is th..
the primary financial goal of a for-profit corporation is to make a profit to maximize shareholder wealth.choosing any
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