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A company's book value of equity is $200 million, and its book value cost of equity is 24%. It has 2 million shares outstanding with a price per share of $125. Its beta is 1.35. The risk free rate is 2.50% and the return on the market is 18.25%. The company also has two bonds. The book value of bond 1 is $65 million and its coupon rate is 10%. The book value of bond 2 is $35 million and its coupon rate is 12%. The current yield to maturity for bond 1 is 9% and the current yield to maturity for bond 2 is 13%. Bond 1's price is $1,025 and bond 2's price is $960. The company's tax rate is 35%.
Calculate the company's market value debt to equity ratio.
Determine the isocost points for all the alternatives.
Suppose that you take out a loan for $60,000 that is to last for 10 years. The interest rate is 9% APR, and the payments are monthly. After making the payment that corresponds to 2 ½ years after the time of the loan, you decide that you would like to..
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $11.65, but management expects to reduce the payout by 4 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a sha..
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The most recent financial statements for Williamson, Inc., are shown here (assuming no income taxes): Income Statement Balance Sheet Sales $ 7,200 Assets $ 24,500 Debt $ 10,000 Costs 5,270 Equity 14,500 Net income $ 1,930 Total $ 24,500 Total $ 24,50..
What is Jake's weighted average cost of capital?
A project has a 0.78 chance of doubling your investment in a year and a 0.22 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
New Business Ventures, Inc., has an outstanding perpetual bond with a coupon rate of 8 percent that can be called in one year. The call premium is set at $175 over par value. There is a 60 percent chance that the interest rate in one year will be 10 ..
The MoMi Corporation’s income before interest, depreciation and taxes, was $2.5 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 19% of pre..
Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true, assuming the CAPM is correct. Stock A would be a more desirable addition to a portfolio then Stock B. In equilibrium, the expected return on Stock B will..
Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of..
Prepare a capital valuation of the freehold of the following office building. Albion House an office block constructed some 30 years ago on Ground and 3 upper floors and has a Net Internal Area (NIA) of 1,000 square metres, evenly arranged over all 4..
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