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Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 7 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon rate of 8 percent, and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years. Suppose the most recent dividend was $4.40 and the dividend growth rate is 6 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company’s WACC?
The purchase price and value of a home are $200,000. A borrower secures an 80% LTV, 30 year ARM with an initial interest rate of 4% to finance the purchase. Mortgage terms call for annual interest rate adjustments. What is the monthly payment for the..
Why are investors risk-averse? How can investors deal with different degrees of risk? What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio? What is the beta coeff..
What is the beta of a four-stock portfolio including 10% of Stock A with a beta of 4, 20% Stock B with a beta of 3, 30% Stock C with a beta of 2, and 40% Stock D with a beta of 1?
A one-year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year?
A Canadian firm is evaluating a project in the United States. This project involves the establishment of a lumber mill in Wisconsin to process Canadian timber. The factory expects to service clients in the construction industry. All cash flow figures..
You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's fina..
Imagine that you are holding 5,000 shares of stock, currently selling at $40 per share. You are ready to sell the shares but would prefer to put off the sale until next year due to tax reasons. What will be the value of your portfolio in January (net..
How to get the holding period return for a $980 selling security that purchased fiver years before at $798? Prove that this return overstates the annualized, compound return.
The effect of taxing demanders are the same as taxing suppliers. The demand for Pepsi is more elastic Than the demand for soda.
A company has a $20 million portfolio with a beta of 1.2. It would like to use future contracts on a stock index to hedge its risk. The index future price is currently standing at 1080, and each contract is for delivery of $250 times the index. What ..
If the standard deviation of a stock's returns over the last 12 quarters is 4 percent, and if there is no perceived change in volatility, there is a ____ percent probability that the stock's returns will be within ____ percentage points of the expect..
Find the levelized cost of electricity in $/kWh for a new natural gas fired power plant that has an initial capital cost of $700 million, an expected lifetime of 35 years, and will produce 1.2 billion kWh/year of electricity. Assume there will be no ..
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