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The Accidental Petroleum Company is trying to determine its weighted average cost of capital for use in making a number of investment decisions. The firm's bonds were issued 6 years ago and have 14 years left until maturity. They carried an 8% coupon rate, and are currently selling for $962.50. The firm's preferred stock carries a $4.60 dividend and is currently selling at $42.50 per share. Accidental's investment banker has stated that issue costs for new preferred will be 50 cents per share. The firm has significant retained earnings, but will also need to sell new common stock to finance the projects it is now considering. Accidental Petroleum common stock is expected to pay a $2.50 per share dividend next year, and is expected to maintain an 8% growth rate for the foreseeable future. The stock is currently priced at $50 per share, but new common stock will have flotation costs of 60 cents per share. Calculate the costs of the various components of Accidental Petroleum's capital (Kd, Kp, Ke, Kn). The firm's tax rate is 34%
KADS, Inc., has spent $480,000 on research to develop a new computer game. The firm is planning to spend $280,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $58..
Is your course instructor male or female?- What is the average annual snowfall in Buffalo, New York?- Pick a student in your class (not yourself). How old is he or she?
The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed. Since mergers are frequently financed by debt rather than equ..
Suppose that a mining operation has spent $8 million developing an ore deposit in South America. Current expectations are that the deposit will require 2 years of development and will result in a realizable cash flow of $10 million at that time. ompu..
Colby contracts in writing to sell his 2005 Dodge-brand pick-up truck to Efrem for $10,500. Colby agrees to deliver the truck on Friday, and Efrem promises to pay the $10,500 on the following Monday. Colby contends that Efrem’s repudiation released h..
Explain what an MNE needs to consider when borrowing funds in a foreign currency. As part of your answer, explain what happens if the foreign currency of the borrowed funds appreciates or depreciates, how you calculate the effective cost of borrowing..
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,900.00, and it would cost another $1,970.00 to install it. What is the initial cash outla..
Market/Book Ratio Winston Washers's stock price is $75 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 550 million sh..
Your firm has an average collection period of 21 days. Current practice is to factor all receivables immediately at a discount of 1.1 percent. What is the effective cost of borrowing in this case?
You place an order for 540 units of inventory at a unit price of $170. The supplier offers terms of 2/15, net 60. a-1 How long do you have to pay before the account is overdue? Days until overdue days a-2 If you take the full period, how much should ..
Financial statement analysis can be used to identify weaknesses in a firm’s operations. Uncollectible accounts receivable – you could compare the firm’s average collection period to other peer firms and look for trends over time that might suggest de..
What is the relationship between the price of a bond and its YTM? Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bo..
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