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WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $10 million would have a cost of re = 15%. Furthermore, Klose can raise up to $3 million of debt at an interest rate of rd = 10%, and an additional $6 million of debt at rd = 12%. The CFO estimates that a proposed expansion would require an investment of $3.8 million.
What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal?
Patton Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. It’s before-tax cost of debt is 8% and its marginal tax rate is 40%. The current stock price is P0 = $22.50.
1 which of the statements below is false?a if you invest money for a short period and buy a six-month cd you will not
Start Up Plc is expected to pay a dividend of 4.75 per share at the end of year 1 and these dividends are expected to grow at a constant rate of 3.5% per year forever. If the required rate of return on the stock (and all stocks of the same risk class..
Data Recovery Services (DRS) specializes in data recovery from crashed hard drives. The price charged varies based on the extent of damage and the amount of data being recovered. DRS offer a 10% discount to students and faculty at educational institu..
Consider 3 Treasury bonds which pay semi-annual coupons. Bond A has 5 years remaining to maturity and a coupon rate of 10%. Using Excel, create a single graph showing the price of Bonds A & B for varying YTMs. Let YTM range from 0.5% to 18% per year ..
Gary's Boutique has 4,000 shares of stock outstanding at a price per share of $19. The firm has decided to repurchase 500 of those shares in the open market. What will the price per share be after the share repurchase is completed? Ignore taxes and m..
Puckett follows a residual distribution policy with all distribution as dividends, what will be its dividend payout ratio?
Which one of the following actions is indicative of a restrictive short-term financial policy?
Terrell Enterprises recently paid a dividend, D0, of $1.50. It expects to have non constant growth of 25% for 2 years followed by a constant rate of 6% thereafter. The firm's required return is 12%. What is the firm's intrinsic value today?
What is the Net Working Capital for 2012 and what is it for 2011 - what is the Change in Net Working Capital (NWC)?
The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.6 percent?
Find the price of a $1000 par value 10-year bond with coupons at 8.4% convertible semi-annually, which will be redeemed at $1050. The bond is bought to yield 10% convertible semi-annually for the first five years and 9% convertible semi-annually for ..
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