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Collins Manufacturing Company has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market - Source of Capital Proportions Long-term debt 30% Preferred stock 10% Common stock equity 60% Debt: The firm can sell a 20-year, $1,000 par value, 9 percent bond for $980. A flotation cost of 2 percent of the face value would be required in addition to the discount of $20. Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm’s common stock is currently selling for $40 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years at a rate of 8%. In order to assure that the new stock issuance will sell, it must be underpriced at $1 per share. In addition, the firm must pay $1 per share in flotation costs. The firm’s tax rate is 40 percent. Required: Calculate the firm’ weighted average cost of capital for the Collins Company assuming the firm has exhausted all retained earnings. (That is, you must consider flotation costs for the common stock issuance.)
Review Nash-Finch Company and The Kansai Electric Power Co, Incorporated financial statements from the past three years. Calculate the financial ratios for the assigned company's financial statements, and then interpret those results against company ..
Suppose you want to hedge a $370 million bond portfolio with a duration of 7.7 years using 10-year Treasury note futures with a duration of 4.7 years, a futures price of 107, and 99 days to expiration. The multiplier on Treasury note futures is $100,..
A security analyst has forecast the dividends of Hodges Enterprises for the next three years. His forecast is D1=$1.50; D2=$1.75; D3=$2.20. He has also forecast a price in three years of $48.50. The rate of return for similar risk common stock is 14%..
You are planning your retirement in 10 years. You currently have $175,000 in a bond account and $615,000 in a stock account. You plan to add $6,500 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..
Perform a Du Pont analysis on BestCare. Assume that the industry average ratios and financial statements for Best Care
Given the following information, calculate the firm's WACC. rd=8%,D0=$2.00, Tax rate=40%, p0=$25, Growth=0%,flotation cost on common equity=15%.
Natasha is 30 years old and currently employed as a Tier 2 field service representative for a telephony corporation and earns $38,000 a year that she anticipates will grow at 3% per year. What is the present value of the salary differential for compl..
Friendly’s Quick Loans, Inc., offers you $6.50 today but you must repay $8.35 when you get your pay check in one week (or else). What is the effective annual return Friendly’s earns on this lending business?
Cost of project= $5,676.10 WACC= 11% Year 1 cash inflow $1000 year 2 cash inflow $1500 year 3 cash inflow $2000 year 4 cash inflow $3000 year 5 cash inflow $1600 Calculate the modified internal rate of return for this project.
hedging currency risks at aifs harvard business school case 9-205-026 2007.instructions this case should be done
Suppose that you are thinking about buying a car and have narrowed down your choices to two options. The? new-car option: The new car costs ?$28,000 and can be financed with a five-year amortized loan at 5.17?%. What is the difference in monthly paym..
An engineering firm estimates that its cost for employer sponsored health insurance will be $750,000 next year and increase at 11% per year for the next 5 years. The company CFO wants to budget a uniform amount each year to cover these costs. If the ..
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