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Hamada equation
Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 30% debt and 70% equity; however, the CEO believes the firm should use more debt. The risk-free rate, rRF, is 6%; the market risk premium, RPM, is 7%; and the firm's tax rate is 40%. Currently, Cyclone's cost of equity is 12%, which is determined by the CAPM. What would be Cyclone's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Round your answer to two decimal places.
You are willing to pay $15,625 now to purchase a perpetuity which will pay you and your heirs $1,250 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this w..
Projected operating costs (other than depreciation) are 73% of sales for the new beverages. However, Coca-cola estimates that projected sales for other carbonated beverages will fall $5 million in 2016, $9 million in 2017, $7 million in 2018, and $4 ..
A $1,000 bond is issued paying 8% interest semi-annually for 15 years while the market is paying 7% for similar bond issues. What price would investors expect to pay for the bond?
EMC Corporation has never paid a dividend. Its current free cash flow of $370,000 is expected to grow at a constant rate of 4.7%. The weighted average cost of capital is WACC = 11.75%. Calculate EMC's estimated value of operations. Round your answer ..
Moby Dick Corporation has sales of $4,635,480 income tax of $400,651; the selling general and administrative expenses of $294,228; depreciation of $395,852; cost of goods of $2,543,550; and interest expense of $188,723. Calculate the amount of the fi..
What is the beta of your portfolio?
Your task is to analyze two mutually exclusive projects: Using the payback criterion, explain which investment should you chose? Using the discounted payback criterion, explain which investment should you chose? Using the NPV criterion, explain which..
In a new issue, the ____are those funds that remain after the necessary fees have been deducted
The price of preferred stock X is $65.00, and the divided per share is 7% of the par value of $100. Calculate the required rate of return on the preferred stock,rp.
If the spot rate for Euro is .81 Euro is equal to 1 US $, and the annual interest rate on fixed rate one-year deposits of Euro is 2.5% and for US$ is 1.5%, what is the nine-month forward rate for one Euro in terms of dollars? Assuming the same intere..
Suppose that the marginal benefit associated with corn production is MB = 2.5. The marginal private cost of production is MPC = 2 + 0.1Q, where Q measures bushels of corn produced in thousands. Compute the privately optimal output and the socially op..
In your opinion, what are the primary challenges for each of these firms with respect to their employees, customers, suppliers, and shareholders? Be specific.
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