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Mr. Williams is purchasing an entire bottling plant for $42,500,000. He has a tax rate of 35 percent.
He has a contract to bottle for SNAP-ON ICE TEA. The break- even numbers of the factory are good and Bonika Financial has calculated the IRR of the deal at 22%. The capital structure of Mr. Williams new bottling plant is as follows: $10,000,000 in equity at 6%, a preferred investors owns 100,000 shares of $25 each that pays a dividend of $5 annually. The rest of the capital structure is financed with debt which carries an annual interest expense of $3,000,000.
Calculate the WACC of the bottling plant.
The club charges a membership fee of $35 per year. The membership entitles George join 6 hikes a year, which he utilizes to the maximum. During a hike, he usually buys some hiking equipment and a sports drink from the club. On average, he spends $60 ..
Denali Inc. has the following cash flows and a 10% required rate of return: Year Cash Flow 0 - $4,400 (Year 1) 1,500 (Year 2) 2,400 (Year 3) 1,200 (Year 4) 2,600. What is the profitability index for this project?
Zhao Automotive issues fixed-rate debt at a rate of 8.00%. Zhao agrees to an interest rate swap in which it pays LIBOR to Lee Financial and Lee pays 6.6% to Zhao. What is Zhao's resulting net payment?
Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 10%. Its expected earnings this year are $2 per share. Find the stock price, P/E ratio, and growth rate of dividends for plowback ratio..
Wall Mart has decided to buy a chain store in South Africa and now has an exposure to the South African Rand. How should it hedge its short term and long term foreign exchange exposures related to this transaction
A 12-year bond has an annual coupon rate of 8%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 10%. The bond is currently selling at a price above its par value. If market interest rates decline, the pr..
You are an investor in company which is an auto parts supplier. They will pay a dividend next year of $0.80 per share and are expected to grow at an annual rate of 2%. The price of the stock is currently $37.24. What is the expected return on the sto..
We learn about how much debt should a firm take or in other words, we learn about a firm's capital structure. Please give your thoughts on this.
An electrical energy audit indicates that the motor control center consumption is 8´106 kWh per year. By using high efficiency motors, a savings of 15% can be achieved. The additional cost for these motors is about $80,000. Assuming that the average ..
You are to make monthly deposits of $725 into a retirement account that pays 10.1 percent interest compounded monthly.
Due to a recession, expected inflation this year is only 2.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2.25%. Assume that expectations theory holds and the real risk-free rate is r* = 3.5%...
A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semi annually. What is the bond’s current yield?
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