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Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Goiânia also has 200,000 shares of preferred stock, which pays annual dividend of $5.25 per share. The tax rate of Goiânia is 35%. Calculate the probability that Goiânia will not be able to pay interest, sinking fund, and preferred dividends, out of its current income, next year. Show solutions.
Evaluate the company's weights of capital (debt, preferred stock and common stock) and estimate the company's before-tax and after-tax component cost of debt.
You have $14,658.34 in a brokerage account, and you plan to deposit an additional $4,000 at the end of every future year until your account totals $280,000. You expect to earn 14% annually on the account. How many years will it take to reach your goa..
An investor currently holds the following portfolio of 4 stocks, each having equal weight: What is the portfolio’s expected return? What is the portfolio’s beta risk? Is it more or less risky than the market?
App Store Co. issued 17-year bonds one year ago at a coupon rate of 6.3 percent. The bonds make semi-annual payments. If the YTM on these bonds is 5.5 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer..
Jim Busby calls his broker to inquire about purchasing a bond of Disk Storage Systems. His broker quotes a price of $1,180. Jim is concerned that the bond might be overpriced based on the facts involved. Compute the new price of the bond and comment ..
The town of Cedar Falls has decided to lease their parking meters for 10 years to a private company in order to raise revenue for some much needed road repairs. Cedar Falls' mayor informs you that she wants the deal with greatest Net Present Value (N..
Broussard Skateboard's sales are expected to increase by 25% from $7.2 million in 2013 to $9.00 million in 2014. Its assets totalled $6 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as pro..
What is the discount yield, bond equivalent yield, and effective annual return on a $1 million Treasury bill that currently sells at 97.375 percent of its face value and is 65 days from maturity?
Assume that you are considering the purchase of a 20-year, non callable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semi annual interest payments. If you require an 8.4% nominal yield to maturity on this..
Acme Conglomerate Corporation operated three divisions. One division involves significant research and development, and thus has a high-risk cost of capital of 15%. The second division operates in business segments related to Acme's core business, an..
On July 1, 2014, Agincourt Inc. made two sales. It sold land having a fair value of $915,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,389,036. The land is carried on Agincourt’s books at a cost of $591,1..
E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 8 percent on this stock, how much should..
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