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Cost of Capital. The Conner Company has the following capital structure:
Mortgage bonds, 6%
$ 20,000,000
Common stock (1 million shares)
25,000,000
Retained earnings
55,000,000
$100,000,000
Mortgage bonds of similar quality could be sold at a net of 95 to yield 6½ percent. Their common stock has been selling for $100 per share. The company has paid 50 percent of earnings in dividends for several years and intends to continue the policy. The current dividend is $4 per share. Earnings are growing at 5 percent per year. If the company sold a new equity issue, it would expect to net $94 per share after all costs. Their marginal tax rate is 50 percent. Conner wants to determine a cost of capital to use in capital budgeting. Additional projects would be financed to maintain the same relationship between debt and equity. Additional debt would consist of mortgage bonds, and additional equity would consist of retained earnings. (a) Calculate the firm's weighted average cost of capital, and (b) explain why you used the particular weighting system.
However, competitive pressures and increased costs are expected to shrink margins to 11% in years 4 and 5.
A company issues $5,000,000, 7.8%, 20-year bonds to yeild 8% on January 1, 2007. Using effective-interest amortization, what will the carrying value of bonds be on December 31, 2007 balance sheet?
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the bb corporations has one issue of preferred stock and one issue of common stock outstanding. given the bb
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Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1? a. $3.25 b. $2.44 c. $2.96 d. $2.20..
rod was driving a tractor-trailer when he struck a concrete barrier. the truck was stuck on top of the barrier and
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