Risk premium between the company stock and bond

Assignment Help Financial Management
Reference no: EM131551392

Badger Corp. has an issue of 6% bonds outstanding with 6 months left to maturity. The bonds are currently priced at $996, and pay interest semiannually. The firm's marginal tax rate is 40%. The estimated risk premium between the company's stock and bond returns is 7%. The firm's expects to maintain a capital structure with 40% debt and 60% equity going forward. The company's W.A.C.C. is ____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.

Reference no: EM131551392

Questions Cloud

Mortgage insurance premiums : Ignoring mortgage insurance premiums, homeowner’s insurance premiums, and property tax obligations, how much of a home could you afford?
Expenditure is recorded upon receipt of equipment : As required for fund financial statements, $40,000 encumbrance is recorded at time order was placed. A $41,600 expenditure is recorded upon receipt of equipment
Mortgage from your local bank : You plan to purchase a house for $115,000 using a 30-year mortgage from your local bank. Your bank offers you the following two options for payment:
Calculate your monthly payments on this mortgage : Calculate your monthly payments on this mortgage. Calculate the amount of interest paid over the life of this mortgage.
Risk premium between the company stock and bond : Badger Corp. has an issue of 6% bonds outstanding with 6 months left to maturity. The estimated risk premium between the company's stock and bond returns is 7%.
Finance new research and development laboratory : The Zinn Company plans to issue $10,000,000 of 20-year semi-annual bonds in June to help finance a new research and development laboratory.
What is the time premium of the put option : What is the exercise value of the put option? What is the time premium of the put option?
Calculating returns and variability : Calculating Returns and Variability. What is the standard deviation of the stock's returns?
Transactions costs and taxes : Ignoring transactions costs and taxes, what is your total profit on this investment?

Reviews

Write a Review

Financial Management Questions & Answers

  How much money must the company borrow

The treasurer for Chic Man Clothing must decide how much money the company needs to borrow in July. The balance sheet for June 30, 2010 is presented below: Chic Man Clothing Balance Sheet June 30, 2010 Cash $87,000 Accounts payable $550,000 Marketabl..

  What was the bond current yield

Consider the following information form September 15th, 2012 for a coupon bond with face valueof $1000 and maturity on September 15th, 2014:  What was the bond current yield? Why is the bond's yield to maturity greater than its coupon rate?

  Equity beta-what is the value of the firm

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.5, a debt-to-equity ratio of .5, and a tax rate of 40 percent. Assume a risk-free rate of 5 percent a..

  What is the length of the operating cycle

Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/R) period of 6 days, and an accounts payable (A/P) period of 3 days. The company’s annual sales is $182,795. What is the length of the operating cycle

  What would be the total return of the bond in percentage

A 8.9 percent coupon bond with 11 years left to maturity is priced to offer a 6.95 percent yield to maturity. You believe that in one year, the yield to maturity will be 8.0 percent. What would be the total return of the bond in dollars? What would b..

  A stock has correlation with the market

A stock has a correlation with the market of 0.49. The standard deviation of the market is 25%, and the standard deviation of the stock is 33%. What is the stock's beta?

  Calculate the front-end load

The World Income Appreciation Fund has current assets with a market value of $12.3 billion, 620 million shares outstanding, and a current market price quotation of $21.74. Calculate the front-end load

  Expect value of your portfolio to double with probability

In each subsequent year, you expect the value of your portfolio to double with probability p = 0.45 or to decrease by half with p = 0.55.

  Find the convexity of seven-year maturity

Find the convexity of a seven-year maturity, 8.4% coupon bond selling at a yield to maturity of 9.4%. The bond pays its coupons annually.

  Firm uses its excess cash to complete stock repurchase

What will the new earnings per share be if the firm uses its excess cash to complete stock repurchase?

  What is the dollar value of the company revenues

Xecor Pharma just received revenues of A$2,372,300 in Australian dollars (A$). The only quotes management received are A$2.0651/£ and $1.8538/£. What is the U.S. dollar value of the company's revenues?

  Annual annuity-compounded annually

Sara, who has just turned 36, would like to have an annual annuity of $21,500 paid over a 20 year period, the first payment occurring on his 66th birthday. How much must Sara save each year (end of year) for the next 29 years to have this annuity, if..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd