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Filer Manufacturing has 9.1 million shares of common stock outstanding. The current share price is $61, and the book value per share is $3. The company also has two bond issues outstanding. The first bond issue has a face value of $71.6 million and a coupon rate of 7.8 percent and sells for 107.5 percent of par. The second issue has a face value of $61.6 million and a coupon rate of 8.3 percent and sells for 110.5 percent of par. The first issue matures in 7 years, the second in 28 years.
Suppose the company’s stock has a beta of 1.1. The risk-free rate is 3.9 percent, and the market risk premium is 7.8 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent. What is the company’s WACC?
Avicorp has a $12.6 million debt issue outstanding, with a 5.9% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. If Avicorp faces a 40..
A bond has a $1,000 par value, 14 years to maturity, and a 6% semiannual coupon and sells for $975. Assume that the yield to maturity remains at 6.27% for the next 2 years. What will the price be 2 years from today?
Wilson’s Market is reviewing a project with sales of 6,200 units plus or minus 2 percent at a sales price of $29 plus or minus 1 percent per unit. The expected variable cost per unit is $11 plus or minus 3 percent and the expected fixed costs are $87..
Capstone Investments is considering a project that will produce cash inflows of $11,000 at the end of Year 1, $24,000 in Year 2, and $36,000 in Year 3. What is the present value of these cash inflows at a discount rate of 12 percent?
You are buying a house and will borrow $220,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.50 percent. What are the most points you would be willing to..
Consider Apple stock. Look at the current price of the stock and options expiring in Ma. First find the historical volatility. To do this calculates the change in LN (S) daily for 60 days. Then find the variance. Excel has the function VAR () to do t..
David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 11%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.61%. What is the com..
XYZ Corporation has just issued a 20 year, 8% annual coupon bond that is callable after five years at a price of $1,075. The current yield to maturity of bonds with similar risk is 8% annually. Assume that the bond was issued at par value. What is th..
What is the price of a 20-year bond that has a 5% semiannual coupon rate with a 6% YTM? Is this Bond selling at a Premium or at a Discount? Assume Par Value of $1000.
Suppose a company has a net income of $1,000,000 and a plowback ratio of 40%. There are 50,000 shares of stock outstanding. The company plans to increase dividends by 22% each year for the next 2 years and then apply a 2.25% growth rate to dividends ..
You plan to invest $3343 in a money market account which will pay an annual stated (simple) interest rate of 7.27 percent, but which compounds interest on a weekly basis. If you leave this money on deposit for 10 years, what will be your ending balan..
A large retailer obtains merchandise under the credit terms of 3/20, net 40, but routinely takes 70 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's e..
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