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Assume that a firm's manager decides to fund its entire investment need this year by issuing $500 million in bonds. After-tax cost of these bonds is 6%. The firm’s optimal capital structure calls for 40% debt and 60% equity. The cost of equity is 16%. Which of the following statements is the most correct?
A) The firm should use 6% as the required rate of return for all projects this year.
B) The firm should use 6% as the required rate of return for all average-risk projects this year.
C) The firm should use 12% as cost of capital to evaluate average-risk projects.
D) Only B and C are correct statements.
E) Only A and B are correct statements.
D) None of the above is an answer.
Compute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using a forward contract and At what future spot exchange do you think Airbus will be indifferent between the option and money market hedge?
you recently graduated from college and your job search led you to east coast yachts. since you felt the companys
A corporate bond’s annual interest is 5%, paid semi-annually and it matures in 12 years. If other bonds of similar risk return 4% annually, what is the value of the bond today?
A firm has 100,000 shares of stock outstanding. The firm is considering borrowing $1.3 million at 7.5% interest and using the loan proceeds to repurchase 20,000 shares of stock. What is the value of the firm? Ignore Taxes.
A person owns a section of farm land and is cash renting it to a long time neighbour who is not a relative. What does this person have to do to get the land designated Qualified Farm Property?
however you have identified a potential market for your products unfortunately it is located in a country that does not
Global Financial Corporation (GFC) has 10 million shares outstanding, each currently worth $80 per share. The firm’s mangers are considering a plan to split the company’s stock 2-for-1, but they are concerned about the impact this split announcement ..
Silver Dart Lodge Inc. sold an issue of 25-year, $1,000 par value bonds to the public. The bonds has a 7.25% coupon rate and pays interest annually. The current market rate of interest on the Silver Dart Inc. bonds is 6.5%. What is the current market..
Aspen's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of de..
Derive the functional relationship between the no arbitrage values of the two vertical spreads, C(K1)-C(K2) and C(K2)-C(K3)?
You are paying an effective annual rate of 14.50 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on your account?
Evaluate the performance of a company using various financial analytical tools and analyse different patterns of cost behaviour and apply cost-volume-profit analysis to business decisions.
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