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Scenario: Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%.
The common stock is trading at $50 per share and next year's dividend is $2.50 per share that is growing by 4% per year.
Prepare a minimum 700-word analysis including the following:
Calculate the company's weighted average cost of capital. Use the dividend discount model. Show calculations in Microsoft Word.
The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC.
Explain and defend why you agree or disagree. Report how would you advise the CEO.WACC and Corporate Investment Decisions
Suppose you purchased a bond with 30-year maturity and 4 percent coupon paid annually. Compute the initial price of the bond.
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If you deposit money today in an account that pays 4.5% annual interest, how long will it take to double your money?
Describe agency costs and the impact on bondholders. Distinguish between direct and indirect costs in a corporate bankruptcy.
In some of these states, the eligibility expansions have covered all children. - How would you design a quasi-experimental analysis to evaluate the impact of these expansions?
Michael Lewis (the author of Moneyball) writes of Billy Beane, “it was hard to know which of Billy’s qualities was most important to his team’s success.” A great leader usually will have many strong qualities (distinctive attributes or characteristic..
The ThisInstructorIsSoNice Company expects to have net income of $18 million for the year, and to pay out $3 million in dividends to common stockholders. There is no preferred stock. What is the expected "addition to retained earnings" for the year?
The current market price of a security is $40, the security's expected return is 13%, the riskless rate of interest is 7%, and the market risk premium is 8%. a. What will be the security's price, if the covariance of its rate of return with the marke..
Nevada Inc. is considering the purchase of two alternative planes. Calculate the NPV of each plane. Calculate MIRR of each plane
Which of the following statements are true in relation to the Capital Asset Pricing Model. Which of the following statements are true in relation to risk and uncertainty? Which of the following best describes the expected rate of return?
The current one-year T-bill rate is .30 percent and the expected one-year rate 12 months from now is 1.00 percent. According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security?
Sloan Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,600 per unit; variable costs = $320 per unit; fixed costs = $2.7 million; quantity = 78,000 units. Suppose the company believes all of its estimates ..
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