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A company is thinking about investing in a new project. The balance sheet reports that they currently have $36 million worth of long-term debt and $24 million worth of common equity. They also have 1.2 million shares of stock outstanding and the stock currently trades for $35 per share. They have no preferred stock. What is the weight of equity in the company s capital structure? 53.85% 40.00% 41.18% 63.64% None of the above
Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost for capital. Coupon rate on bonds: 9 %. Yield to maturity on bonds: 11% next expected dividend on common stock 3.00$, current price for comm..
Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. a. Find the modified duration. b. Refer to part a. If the interest increases by 25 basis points, what is the exact change in price? c...
Fred borrowed $2,000 from a loan shark to be repaid in 8 years with 14% annually compounded interest. The loan may be repaid at the end of any earlier year with no prepayment penalty. Please show detail steps
Using Modigiliani and Miller’s Proposition II, determine the required return on unleveraged equity. Evaluate why violations of the Modigiliani and Miller assumptions of perfect markets require revisions to your capital budgeting analysis.
Suppose you are committed to owning a $198,000 Ferrari. If you believe your mutual fund can achieve a 13 percent annual rate of return and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?
Atlantis Fisheries issues zero coupon bonds on the market at a price of $415 per bond. Each bond has a face value of $1,000 payable at maturity in 17 years. What is the yield to maturity for these bonds?
You hold a portfolio of stocks with a value of $1,000,000. You expect that you will be selling the stocks in the portfolio in one year. You are considering hedging your market risk by using the 1-yr S&P 500 Index Future. What side of the futures posi..
Machine C has an initial cost of $40,000, maintenance costs of $5,000 per year and a salvage value of $12,000 after its 3-year useful life. Assuming an interest rate of 10% per year, which of the following would be closest to the present worth of the..
Stock A has exhibited a standard deviation in stock returns of 0.5, whereas Stock B has exhibited a standard deviation of 0.6. The correlation coefficient between the stock returns is 0.5. What is the variance of a portfolio composed of 70 percent St..
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,900 and sell its old washer for $2,900. The new washer will last for 6 years and save $1,650 a year in expenses.
The Summit Petroleum Corporation will purchase an asset that qualifies for three year MACRS depreciation. The cost is $180,000 adn the asset will provide the following stream of earnings before depreciation and taxes for the next four years.
You were recently hired as management director of the new I Can Business Incorporated (ICBI). You have been asked to establish policies and systems for the business. Explain the similarities and differences of the two budgets. Give an example of budg..
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