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A firm has determined its optimal capital structure that is composed of the following sources and target market value proportions. Table 1: Source of Capital Target Market Portfolio Long Term Debt 20% Preferred Stock 10 Common Stock Equity 70 Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of 2 percent of the face value would be required in addition to the discount of $40. The firm's tax rate is 40%. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: A firm's common stock is currently selling for $18 per share. Floatation costs for a new stock issuance is expected to be $3 per share of stock. The firm anticipates to pay a dividend equal to 6% of the current share price and anticipates that the dividend will continue to grow at a constant rate of 5% per year. 1) What is the firm's cost of a new issue of common stock? (See Table 1) 2) The firm's cost of retained earnings is? (See Table 1) 3) The weighted average cost of capital up to the point when retained earnings are exhausted is? (See Table 1) 4) The weighted average cost of capital after all retained earnings are exhausted is?
stock and bond valuations bull problem 1 on page 251 using the earnings model what is the value of the stock?is the
The local media are considering coming out in support of the Mayor's position on issue, but as the Mayor's public relations assistant, you have work to do to convince them completely.
Which of the following will result from a stock repurchase? a. Earnings per share will rise. b. Number of shares will increase. c. Corporate cash is conserved. d. Ownership is diluted
The firm tries to maintain a 20 percent debt and 80 percent equity of its planned capital expenditures and does not plan to issue more stock. The firm estimates to earn 12 million in the next year.
From a financial perspective, should Mercy lease the surgical device or borrow the money to purchase it? Show your work.
A ten-year bond, with par value equals $1000, pays 7% annually. If similar bonds are currently yielding 6%? annually, what is the market value of the bond using the semi annual analysis.
Floatation cost for debt is 4% and 8% for equity. What is the project's NPV before and after adjusting for floatation cost?
use assumed numbers for a hypothetical firm to demonstrate the difference between lifo and fifo costing method. comment
The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell?
charles royston was checking the year-end balances for his wood furniture manufacturing and re-tail business and was
prepare a 5-7 page double-spaced paper that examines the issues associated with the topic what makes doing business in
computation of break even points.east publishing company is doing an analysis of a proposed new finance text book.
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