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Schalheim Sisters Inc. has always paid out all of its earnings as dividends; hence, the firm has no retained earnings.This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its WACC?
a. The market risk premium declines.
b. The flotation costs associated with issuing new common stock increase.
c. The company’s beta increases.
d. Expected inflation increases.
e. The flotation costs associated with issuing preferred stock increase.
Rolling Company bonds have a coupon rate of 4%, 14 years to maturity and a current price of $1,086. What is the YTM? The current yield? (Assume semi-annual coupon payments unless it is explicitly stated to use annual coupon payments)
Calculate zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. - What are the forward rates for the following periods: 6 months to 12 months, 12 months to 18 months, and 18 months to 24 months?
Nuada Airgetlam wants to create a $75,000 portfolio comprised of two stocks plus a risk-free security. Stock A has an expected return of 13.01 percent and stock B has an expected return of 11.47 percent. Nuada wants to own $27,000 of stock B. The ris..
An owner can lease her building for $120,000 per year for three years. The explicit cost of maintaining the building is $40,000, and the implicit cost is $55,000. All revenues are received, and costs borne, at the end of each year. If the interest ra..
Create a report that includes a discussion and analysis regarding how such a supplier makes such a determination in order to maximize the firm's profits. Include in your response:
My assignment is to generate estimates of the weighted average cost of capital (WACC) for five different companies picked from different industries: What are some possible reasons for why the WACC's in the table different from one another? Finally, d..
Using the average daily rates for the months of Janurary through May 2016, a student created a simple linear regression model for data documenting public transportation usage. The single causal factor considered was a linear trend. The resulting regr..
Most of us intuitively understand that a dollar required today does not have the same value as a dollar needed (or utilized) in the future. This is due to several factors including interest rates, compounding factors, discounting factors and financia..
The Seneca Children’s Fund (SCF) is a local charity that runs a summer camp for disadvantaged children. The fund’s board of directors has been working very hard over recent years to decrease the amount of overhead expenses, a major factor in how char..
Using the information in the following table, find the value of each asset.: Cash Flow: Asset, End of Year, Amount, Appropriate required return:
Sloan Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,200 per unit; variable costs = $240 per unit; fixed costs = $2.6 million; quantity = 70,000 units. What values should the company use for the four va..
The ABC Company currently has $16,000,000 in physical assets that have always generated a steady stream of earnings for the company. The management of the firm has always paid all of its earnings to shareholders as a dividend. What is the required ra..
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