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A firm wants to create a weighted average cost of capital (WACC) of 7.2 percent. The firm's cost of equity is 10 percent and its pre-tax cost of debt is 8 percent. The tax rate is 34 percent. What does the debt-equity ratio need to be for the firm to achieve its target WACC?
2013 balance sheet showed Current assets of $68,000 and Current Liabilities of $59,000. The 2014, balance sheet shows Current assets of $54,000 and Current Liabilities of $65,000. What was the company’s change in net working capital (NWC)?
An investor purchased an eight-year financial instrument having the following features. The investor receives payments of $10,000 at the end of each year for eight years. Calculate the purchase price to produce an annual yield of 6% over the eight y..
A 20-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $950. If the yield to maturity remains at its current rate, what will the price be 10 years from now? $950.00 $946.22 $964.80 $863.84 $1,000
Given the following probability distribution describing your expectations concerning the return on this stock, compute your expected return?
You are considering an investment with the following cash flows. If the required rate of return for this investment is 13.5%, should you accept it based solely on the internal rate of return rule? Why or why not?
An investor wants to save for five years for a down payment on a house. She deposits $200 per month into a savings account paying 7% compounded monthly. At the end of the five years, she places the balance of the savings account as a down payment on ..
Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1. Ethier is financed with 55% debt and has a levered beta of 1.5. If the risk free rate is 6% and the market risk premium is 6%, how much is the additional premium that Ethier's s..
Ross has decided that he wants to build enough retirement wealth that, if invested at 7 percent per year, will provide him with $4,200 of monthly income for 30 years. To date, he has saved nothing, but he still has 20 years until he retires. How much..
Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $8 and are currently selling for $86 a share. What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% ma..
Assume that the risk free rate is 6% and the required rate of return on the market is 13%. What is the required rate of return for Sears, which has a beta of 2.0? What is the required return for the overall stock market?
You have just purchased a five- year maturity bond for $ 10,000 par value that pays $ 610 in coupon interest annually ($ 305 every six months). You expect to hold the bond until maturity. Calculate your expected total return if you can reinvest all c..
The purchase price and value of a home are $200,000. A borrower secures an 80% LTV, 30 year ARM with an initial interest rate of 4% to finance the purchase. Mortgage terms call for annual interest rate adjustments. What is the monthly payment for the..
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