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Duster Inc the following capital structure: Debt $ 900,000 Preferred Stock $ 100,000 Common Stock $ 1,000,000 Total Assets = $ 2,000,000 a) Determine the weight of each capital component. b) If the interest rate on the debt before tax adjustment is 8% and the tax rate is 40% determine the cost of debt. Preferred dividends are $ 2.00 per share and preferred stock market price is $ 25. Determine the cost of preferred stock. c) The common stock dividend is paying $ 3.00 and the price of the common is $ 20 with a growth rate of 5%. Determine the cost of common stock. d) Using the figures you have calculated determine Duster Inc weighted average cost of capital. (WACC)
Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Explain wh..
The market price is $900 for a 10-year bond that pays 8% interest semi annually. What is the bond's expected rate of return? If the required rate of return is 11%, is this bond overpriced, fairly priced, or underpriced?
A firm has a retention ratio of 49 percent and a sustainable growth rate of 7.80 percent. The capital intensity ratio is 1.73 and the debt-equity ratio is .84. What is the profit margin?
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of five dollars. What is the preferred stock price if the required rate of return is 8%.
discuss the following topicdoes purchasing power parity ppp eliminate concerns about long-term exchange rate risk? one
Should Personal Auto Insurance be Mandatory? Should an Individuals Credit Score be used in Personal Lines (Auto, Homeowners) Underwriting? Does it make a difference whether it is used for accept/reject decisions or just in pricing?
Seven years ago, Goodwynn & Wolf Incorporated sold a 20-year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of retur..
Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,610; depreciation, $640; and other fixed costs, $600. Each st..
Financial Appraisals Inc. is considering purchasing new software. Determine the payback period (in years) for this project. Software initial cost is $56,000 and would yield after-tax cash flows of $14,000 the first year, $16,000 the second year, $19,..
Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a $4 per share dividend in 14 years, and you expect dividends to grow perpetually at 5 percent per year thereafter. If the discount rate is 13 percent,..
Molteni Motors Inc. recently reported $8 million of net income. Its EBIT was $15 million, and its tax rate was 36%. What was its interest expense?
Upper Gullies Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the pr..
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