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The Sunbelt Corp. has $40 million of bonds outstanding thatwere issued at a coupon rate of 12 7/8 percent seven yearsago. Interest rates have fallen to 12 percent. Mr.Heath does not expect the rates to fall any further. Thebonds have 18 years left to maturity, and Mr. Heath would like torefund the bonds with a new issue of equal amount also having 18years to maturity. The Sunbelt Corp. has a tax rate of 36percent. The underwriting cost on the old issue was 2.5percent of the total bond value. The underwriting cost on thenew issue will be 1.8 percent of the total bond value. Theoriginal bond indenture contained a five-year proctection against acall, with an 8 percent call premium starting in the sixth year andscheduled to decline by one-half percent each year thereafter(consider the bond to be seven years old for purposes of computingthe premium). Assume the discount rate is equal to theaftertax cost of new debt rounded up to the nearest wholenumber. Should Sunbelt Corp. refund the old issue?
What are the four main sections of a cash budget what information is conveyed to managers?
The following retirement problem is often used to illustrate Significant aspects of savings and compound interest - see what you can learn by working the problem.
The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the production of the valve can be used by another production group that is currently leasing space for $55,000 per year.
If the stock sells for $63 per share, what is the market-to-book ratio? The price-earnings ratio? If the company had sales of $4.5 million, what is the price-sales ratio?
The company's weighted cost of capital (WACC)
It can instead buy a truck at a cost of $93,000, with annual maintenance expenses of $23,000. The truck will be sold at the end of 4 years for $33,000. Calculate present value if the discount rate is 10%. Calulate to 4 decimals. PV of a Buy = PV o..
How do you explain this contradiction in interest rate effects and what are the big concerns going forward?
Your company wants to raise $7.0 million by issuing 15-year zero-coupon bonds. If the yield to maturity on the bonds will be 6%(annual compounded APR), what total face value amount of bonds must you issue?
Seerex Wok Co. is expected to pay a dividend of $1.60 one year from today on its common shares. That dividend is expected to increase by 5.20 percent every year thereafter. If the price of Seerex is $12.09, what is Seerex's cost of common stock?
What is the yaer 0 project cash flow?c. What are the project's annual cash flows during years 1, 2, ,and 3? Should the maching be purchased? Explain your answer.
Kindle Fire Prevention Corp. has a profit margin of 6.3 percent, total asset turnover of 2.2, and ROE of 18.44 percent. What is this firm's debt-equity ratio?
Debreu's pretax cost of equity is 9%. Its pretax cost of preferred equity is 7%, and its pretax cost of debt is also 5%. If the corporate tax is 35%, what is the weighed average cost of capital? Please show all work.
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