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You are given the following information for Watson Power Co. Assume the company’s tax rate is 40 percent. Debt: 8,000 6.3 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common stock: 350,000 shares outstanding, selling for $53 per share; the beta is 1.09. Preferred stock: 13,000 shares of 3 percent preferred stock outstanding, currently selling for $73 per share. Market: 10 percent market risk premium and 4.3 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC % ?
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only person voting for you. Assume that Schenkel uses cumulati..
Describe and evaluate a company’s pricing and retail strategy. Include analysis of the current market situation and the competitive strategy. Make sure to choose a company that you are familiar with and one that you have not used for other modules in..
The Toy Chest pays an annual dividend of $4.80 per share and sells for $93.20 a share based on a market rate of return of 15 percent. What is the capital gains yield?
Most major investment expenditures have two important characteristics which together can dramatically affect the decision to invest
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge on this inventory by selling 6 futures contracts at 9.56. The futures contracts are based on 112,000 pounds and quoted in cents per pound. At the time the fi..
Air Jet Best Parts, Inc. would like issue 20- years’ bonds to obtain remaining funds for the New Mexico plan. The company currently has 7.5% semiannually coupon bonds in the market that sell for $1,062 and mature in 20 years. What coupon rate should ..
Amos owns 1,200 shares of Fasteners, Inc. stock. The stock closed today at $41.20 a share. Tomorrow, the firm will pay its annual dividend of $.70 a share. The tax rate on dividends is currently 15% with the tax being withheld at the time of payment...
Rixon Corporation purchases CHF call options with a strike price of USD 0.90. The option premium is USD 0.04 per currency unit. A financial analyst at Rixon forecasts the following possible values for spot CHFUSD at maturity. Calculate option payoff ..
Sometimes transaction costs (e.g. related to environment) eat away at or completely erase gains in efficiency. How can you reduce them? What are strategies to use?
One year ago the spot exchange rate between the Chilean peso and the U.S. dollar was Ps600.00/$. During the past year, the Chilean peso fell 35% in value against the dollar. During this same 12-month period, prices in the U.S. were stable but Chilean..
Why does the binomial model converge to a specific value of the option as the number or time periods increase? To what value does the option converge? When "n" approaches infinity, to what famous model does the binomial model converge?
PK Software has 9 percent coupon bonds on the market with 25 years to maturity. The bonds make semiannual payments and currently sell for 111.75 percent of par. What is the current yield on PK's bonds? What is the effective annual yield?
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