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The Allied Group intends to expand the company's operation by making significant investments in several opportunities available to the group. Accordingly, the group has identified a need for additional financing in preferred and new common stock and new bond issues. The risk-free rate for the company is 7%, and the appropriate tax rate is 40%. Also, the beta coefficient for the company is 1.3 and the market risk premium (Km) is 12. New Debt The company has been advised that new bonds can be sold on the market at par ($1000) with an annual coupon of 8%, for 30 years. New Common Stock Market analysis has determined that given the positive history of the firm, new common stock can be sold at $29 per share, with the last dividend being paid of $2.25 per share. The growth rate on any new common stock has been estimated at a constant rate of 15% per year for the next 3 years. Preferred Stock New Preferred Stock can be issued with an annual dividend of 10% of par and is paid annually and currently would sell for $90 per share.
Most home insurance policies cover jewellery for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If $4,300 worth of jewellery and $5,600 of silverware were stolen from a family, what amount of the claim would not ..
A project has an internal rate of return of 10.6 percent. Which one of the following statements must be true based on this information?
Calculate the after-tax cash outflows associated with each alternative.- Calculate the present value of each cash outflow stream using the after-tax cost of debt.
Excited about your pending birth, your grandmother plans to give you $750 for a present on your birthday when you turn 18. How much should she deposit in a savings account when you are born to generate your future present? The savings account pays 3%..
Prepare a report to management, highlighting the advantages and disadvantages of self-constructed assets. Suggest to management two advantages of purchasing the assets from an outside organization, as opposed to constructing the assets internally.
A manufacturing company is purchasing a new machine for $380,000 to expand its production capacity. It will cost an additional $30,000 to do the site preparation. With the new machine installed, the company expects to increase its revenue by $91,000 ..
Using CAPM A stock has a beta of 1.10 and an expected return of 12 percent. A risk-free asset currently earns 2.6 percent. What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a b..
Which of the following variables can change during the life of a bond?
A business professional needs to easily and accurately calculate trade and cash discounts, interest, and interest rates. The list price for a radio is 22% higher than its net price. If the net price is $29.00, what is the list price? What is the amou..
A firm just paid $2.00 on its common stock and expects to continue paying dividends, which are expected to grow 5% each year, from now to infinity. If the required rate of return for the stock is 9%, then the value of the stock is:
At year-end 2013, Wallace Land scaping’s total assets were $1.7 million and its accounts payable were $360,000. Sales, which in 2013 were $2.4 million, are expected to increase by 20% in 2014. Total assets and accounts payable are proportional to sal..
A municipal bond with a coupon rate of 2.5 percent has a yield to maturity of 3.5 percent. Assume a face value of $5,000. If the bond has 20 years to maturity, what is the price of the bond?
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