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Valley flights, inc. Has a capital structure made up of 40% debt and 60% equity and a tax rate of 30%. A new issue of $1000 par bonds maturing in 20 years can be issued with a coupon of 9% at a price of $1,098.18 with no flotation costs. The firm has no internal equity available at this time, but can issue new common stock at a price of $45. The next expected dividend for the firm is expected to grow at a constant annual rate of 5% per year indefinitely. Flotation costs on the new equity will be $7.00 per share. The company has the following independent investment projects available:
Miltmar Corporation will pay a year-end dividend of $3, and dividends thereafter are expected to grow at the constant rate of 4% per year. The risk-free rate is 5%, and the expected return on the market portfolio is 14%. The stock has a beta of 0.82...
You believe that ABC company will pay dividend of $2 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 6% per year into the future. If you require a return of 12 percent on your investment, how much should you be pr..
The president of a large oil company must decide how to invest the company's P10 million of excess profits. He could invest the entire sum in solar energy research, or he could use the money to research better ways of processing coal so that it will ..
Waterways prepared the balance sheet and income statement for the irrigation installation division for 2016. Now the company also needs to prepare a cash flow statement for the same division. The comparative balance sheets for Waterways Corporation’s..
Fleet skills test can be accomplished on a driving range or in actual traffic conditions. Give at least one advantage and one disadvantage of each testing environment.
Boyd purchases a snow blower costing $1,752 by taking out a 13.5% add-on installment loan. The loan requires a 35% down payment and equal monthly payments for 2 years. How much is the finance charge on this loan?
Hooper Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have an 8% annual coupon rate and were issued 1 year ago at their par value of $1,000. What is the yield to maturity? For the coming year, what is the expected curren..
You are given the following information for Watson Power Co. Assume the company’s tax rate is 40 percent. Debt: 10,000 7.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semian..
A 9-year project has an initial fixed asset investment of $44,520, an initial NWC investment of $4,240, and an annual OCF of -$67,840. The fixed asset is fully depreciated over the life of the project and has no salvage value.
A homeowner took out a 25-year, fixed-rate mortgage of $300,000. The mortgage was taken out 10 years ago at a rate of 6.20 percent. If the homeowner refinances, the charges will be $3,500. What is the highest interest rate at which it would be benefi..
What is the approximate yield to maturity for a $1000 par value bond selling for $925 that matures in 8 years and pays a 10 percent coupon that is paid semiannually?
Relative Valuation of common stock: Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: the investor's required rate of return is 15%. the expected level of earning at the end of this yea..
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