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In perfect capital markets, how does leverage affect the cost of equity? a. In perfect capital markets, levered equity's cost increases with the debt-equity ratio. b. In perfect capital markets, leverage increases the cost of levered equity by the corporate bond spread. c. In perfect capital markets, leverage has no effect on the cost of levered equity. d. In perfect capital markets, the cost of levered equity will be less the cost of unlevered equity.
At year-end 2013, Wallace Landscaping’s total assets were $1.8 million and its accounts payable were $450,000. Sales, which in 2013 were $2.1 million, are expected to increase by 20% in 2014. Total assets and accounts payable are proportional to sale..
An investment project costs $10,500 and has annual cash flows of $6,500 for 2 years. If the discount rate is 13 percent, what is the discounted payback period?
A company is 36% financed by risk-free debt. The interest rate is 9%, the expected market risk premium is 7%, and the beta of the company’s common stock is 0.63. What is the company cost of capital? What is the after-tax WACC, assuming that the compa..
At the beginning of the month, you owned $5,000 of General Dynamics, $4,000 of Starbucks, and $7,000 of Nike. The monthly returns for General Dynamics, Starbucks, and Nike were 7.50 percent, −1.66 percent, and −0.69 percent. What is your portfolio re..
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $650,000. The lot was recently appraised at $695,000. At the time of the purchase, the company spent $31,000 to grade the lot and another $3,500 to build a small buildi..
Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
Suppose a stock had an initial price of $80 per share, paid a dividend of $.60 per share during the year, and had an ending share price of $72. Compute the percentage total return. What were the dividend yield and the capital gains yield?
Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 15 years to maturity, make semi-annual payments, and have an YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of ..
Fooling Company has a 10.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $100. What is the yield to call (YTC) for this bond if the current price is 105 percent..
An investor wants to form a two asset portfolio consisting of Treasury bills with a return of 2.5% and a risky portfolio with an expected return of 15.2% and a standard deviation of 16%. The investor wants the expected return of the two asset portfol..
Jury company wants to calculate the component costs in its capital structure. Common stock currently sells for $ 33 And is expected to pay a dividend of $50. Jury's dividend growth rate is 8% and flotation cost is $1.25. Calculate the cost of debt, c..
A bond with a maturity of 18 years sells for $1,108. If the coupon rate is 7.6 percent, what is the yield to maturity of the bond?
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