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Fyre, Inc., has a target debt−equity ratio of 1.70. Its WACC is 8.9 percent, and the tax rate is 35 percent. a. If the company’s cost of equity is 13 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of debt % b. If instead you know that the aftertax cost of debt is 6.9 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
Suppose that you have a Zero-Coupon bond currently trading for $985, the bond has a face value of $1,000, and a time to maturity of 76 days (out of a 365 days year). What is the bond's yield-to-maturity?
According to the liquidity premium theory of interest rates, long-term spot rates are higher than the average of current and expected future short-term rates. Investors are indifferent between different maturities if the long-term spot rates are equa..
Why do you think that Pimlico Ltd established the subsidiary in China instead of Japan? Assume no major country risk barriers.
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $55. What is the total rate of return on the stock? What is the dividend yield? What is the Capital Gains Yield?
If the after-tax present value of buying equipment and using it for six years is $125,000, calculate the break-even after-tax yearly lease payment (seven payments) using a 8% real discount rate. (Assume that lease payments are made at the beginning o..
What steps can stockholders take to reduce the cost of debt? What incentives for stockholders have to do this? Are there any instances where managers’ interests and shareholders’ interests might diverge in their desire to minimize the cost of debt? E..
You have just completed the forecasting process for a new project, and computed the project’s net present value to be ($500,000). You then want to understand the effect on this new project’s net present value of a $500,000 after-tax cash flow increas..
A ten-year bond, with par value equals $1000, pays 5% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.
A large cow barn will cost $150,000 to build today and you figure it will add $18,000 per year to your after-tax cash flows for the next ten years. If the salvage value of the building is 50% after ten years and the cost of capital is 7%, what is the..
XYZ Corporation has a British supplier and an Argentinian buyer. Transactions with his UK supplier are denominated in UK pounds and transactions with his Argentinian buyer are denominated in Argentinian pesos. The UK supplier gives XYZ 30 days from t..
the firm manufactures a global positioning system gps that sells for 2000 with cost of goods sold hardware 30 and
The Poseidon Swim company produces swim trunks. The average selling price for one of their swim trunks is $38. The variable cost per unit is $25. Poseidon swim has average fixed costs per year of $35,194.
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