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The Fitness Studio, Inc.'s, 2015 income statement lists the following income and expenses: EBIT = $775,000, interest expense = $130,000, and taxes = $225,750. The firm has no preferred stock outstanding and 100,000 shares of common stock outstanding. Calculate the 2015 earnings per share
Project K costs $52125 today. Its expected cash inflows are $12000/year for 8 years. With a WACC of 14%, what is the project’s NPV, IRR, MIRR, payback, and discounted payback?
We will start with a discussion of risk and work towards practical application of the model. The textbook provides a list of betas for a selection of stocks. Choose a few firms from that list and discuss whether the betas are what you would expect. B..
It is now the beginning of a year. Jared is considering the purchase of a 7 percent (coupon rate), 10-year bond that is presently priced to yield 12 percent (i.e. market interest rate is 12 percent). If his expectations are correct, what kind of real..
A 5-year maturity 6% coupon rate bond is selling to yield 8%. The bond pays interest semi-annually. One year later, interest rates decrease from 8% to 5%. Par = 1,000. What is the current price of the 5-year maturity 6% coupon bond selling to yield 8..
Sabina Bookstores is thinking about expanding its facilities. In considering the expansion, Sabina's finance staff has obtained the following information; the expansion will require the company to purchase initially (t=0) $5 million of equipment (thi..
Give a reason why each of the following might open a Eurodollar account: a) the government of Iran b) a US private citizen c) a Canadian university professor d) a European based corporation e) a US-based corporation
The Index Portfolio has invested in three stocks with the following beta and dollar amount of investment. The markets expected return is 13% and the risk free rate is 5%. What is the beta of the portfolio? What is the expected return of the portfolio..
A stock has an expected return of 12.9 percent and a beta of 1.15, and the expected return on the market is 11.9 percent. What must the risk-free rate be?
Delta Lighting has 30,000 shares of common stock outstanding at a market price of $15 a share. This stock was originally issued at $31 per share. The firm also has a bond issue outstanding with a total face value of $280,000 which is selling for 86 p..
Suppose that an investor owns 10% of the stock of firm L, and assume that this investor can lend and borrow at the same interest rate as firm L, that is, at 12% (recall the assumption of perfect markets). Based on the trade-off theory of capital stru..
You recently approached your bank about establishing a credit line facility. The terms offered by your bank include a nominal rate of prime + 1.5% (prime is currently 5%) on the amount borrowed, a commitment fee of 25 basis points on the unused porti..
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non-quantitative factors best predict bond defaults. To recoup those costs, some bond rating agencies have tied their ratings to the purchas..
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