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Byron Corporation's present capital structure, which is also its target capital structure, is 40% debt ad 60% common equity. Next year's net income is projected to be $21,000 and Bryan's payout ratio is 30%. The company's earnings and dividends are growing at a constant rate of 5%; the last dividend (D0) was $2.00; and the current equilibrium stock price is $21.88. Bryon can raise all the debt financing it needs at 14%. If Bryon issues new common stock, a 20% flotation cost will be incurred. The firm's marginal tax rate is 40%.
a. What is the component cost of the equity raised by selling new common stock?
b. What is the maximum amount of new capital that can be raised at the lowest component cost of equity?
c. Assume (contrary to the situation in (a.) that at one point along the marginal cost of capital schedule the component cost of equity is 18%. What is the weighted average cost of capital at that point?
Levi Strauss successfully markets Levi jeans on the History channel as a way for older men to stay young forever. What will happen in the jeans market ceteris paribus?
Three fans are to be installed at a mine site; one immediately at a price of $260,000, one in five years at an estimated cost of $310,000 and the third in eight years at a cost of $480,000. Find out the total expenditure as a present value if the ..
Assume you're in charge of the toll bridge that essentially cost free. The demand for bridge crossings Q is given by P = 60 - 2Q. Draw a demand curve for bridge crossings
Given a 15% raise in a good's price and a 25% decrease in quantity demanded for good by consumer, which of the following types of elasticity best describes the demand curve for the consumer?
Determine how the following situations will affect the demand curve for ipods.
Assume your elasticity of demand for your parking lot spaces is -.05, and price is $20/day. If your MC is zero, and your capacity at 9 a.m. is 96% full over the last month, are you optimizing?
Solve the partial derivative
Draw the diagram showing the cost structure of price taker and a market price well above minimum average cost. Given that any firm is price taker, how can a firm capture any economic rent (profits in excess of opportunity cost of capital)?
Results for Linear Demand Curve Estimation. Kenny Mcormick manages a 100-unit apartment building and knows from experience that all units willbe occupied if rent is $900 per month.
In the competitive market, the market demand is Qd=48 - 5p and the market supply is Qs = 7P. The equilibrium price is4
Compute the best response function of each firm in terms of prices. Compute the resulting equilibrium price quantity combination for each firm. Describe your answer with a suitable graph. Also calculate optimal profits of each firm.
A manager at strateline manufacturing much choose between twoshipping alternatives: two day freight and five-day freight. Using five day freight would cost $135 less than using two day frieght.
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