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Joe owns and operates Socccer Stores of America. He has $200000 of his own money in the business as equity capital, but because of the use of debt, the total value of his stores is $1000000. Calculate the percentage of debt in the corporation, and the corporation's leverage factor.
Percentage of debt in the corporation= % (Place your answer in percentage form with two decimal places)
The corporation's leverage factor= (Place your answer as a number with two decimal places)
A colleague has evaluated projects using the firm's average discount rate, which is the discount rate on the average risk project of the firm. He produced the following report:
Consider the following yields on bonds with approximately 20 years to maturity: Calculate the taxable equivalent yields of the tax exempt municipal bonds for the following marginal tax rates: 10%, 15%, 28%, 35%. For which of these tax rates will an i..
Company Z’s earnings and dividends per share are expected to grow indefinitely (i.e. forever) by 5% per year. If next year’s dividend is $10 and the required rate of return is 10%, what should be the current stock price?
Consider a 100,000,000 CMBS pass-through (PT) security consisting of fresh 15 year fixed rate loans that fully amortize over a period of 30 years, and have a WAC of 7% with fees amounting to 0.5%. Why is there generally a large fraction of outstandin..
You are considering purchasing stock in a company. the company is planning to offer the following dividends over the next 3 years ($10, $15, $20) you required rate of return is 10% for your investment. compute the current price of the stock.
Norma’s Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days. If the com..
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,132,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $270,000 per year.
Northern Corporation has just paid a dividend of $1.45 per share on its common stock. The annual dividend is expected to increase by 2%, 3%, and 4% respectively over the next three years and then by 5% per year thereafter. If the opportunity cost is ..
You find a zero coupon bond with a par value of $10,000 and 18 years to maturity. The yield to maturity on this bond is 5 percent. Assume semiannual compounding periods. What is the price of the bond?
Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .95. Calculate Jensen’s alpha for the fund, as well as its information ratio.
Martin invested $1,000 six years ago and expected to have $1,500 today. He has not added or withdrawn any money from this account since his initial investment. All interest was reinvested in the account. Martin earned simple interest rather than comp..
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