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Precision Manufacturing (PM) has 10 million shares of stock outstanding that trade at $120. The risk-free interest rate is 3% and the market risk premium is 7%. This stock has a beta of 2.2. PM also has $500 million in 12% bonds outstanding, and the company has a 40% tax rate. Show all calculations for each of your answers to earn full credit.Part 1: a) Calculate the firm’s market capitalization and then calculate the enterprise value. b) Use the CAPM formula to determine the firm’s cost of equity. c) Utilize this information to calculate Precision Manufacturing’s weighted average cost of capital.Part 2: a) Assume that PM issues $240 million in common stock to buy back $240 million in bonds in order to recapitalize the firm and lower its annual interest expenses. What is Precision Manufacturing’s new WACC? b) Finally, discuss why there is a change in WACC and explain the impact of the components of capital structure on a company’s cost of capital.
The firm's total fixed cost are $80,000, there are no beginning or ending inventories, Determine the per unit contribution for each of the two models.
new jersey water co njwc is considering whether to refund a 50 million 14 coupon 30-year bond issue that was sold 5
Determine the most appropriate research design for the issue,opportunity, or problem indentified in Week Three. Explain why two other research designs were not used?
Percy's CFO estimates that the company's WACC is 13.40%. What is Percy's cost of common equity? Round your answer to two decimal places.
Current liabilities book and market values stand at $12 and the firm's long-term debt is $40. Calculate the market value of the firm's stockholder's equity.
What is the price of a 6-month Treasury Bill with a stated yield of 2.50%?
Compare linear regression to the moving averages and smoothing techniques used in. Why is linear regression more appropriate for long-range forecasts?
Your company has been offered credit terms on its purchases of 4/30, net 90 days. What will be the nominal annual cost of trade credit if your company pays on the 35th day after receiving the invoice? (Assume a 365-day year.)
financial mangers make decisions today that will affect the firm in the future.nbsp the dollars used for investment
A Treasury bond that matures in 10 years has a yield of 5.75%. A 10-year corporate bond has a yield of 7.25%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond?
You have been given financial statements and asked to analyze financial performance of your division. Other managers have suggested you use financial ratios in your analysis.
What are the firm's adjusted tax liabilities for the years 2006 through 2010? (c) What total tax refund will the firm receive after the adjustment?
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