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Craig company has a market value of $100M, consisting of 1M shares selling for $50 per share and $50M of 10% perpetual bonds now selling at par.The company's EBIT is $13.4M and its tax rate is 15%. The company can change its capital structure either by increasing its debts to 70% (based on market values) or decreasing it to 30%. If it decisdes to increase its use of leverage, it must call its bonds and issue new ones with a 12% coupon. If it decides to decrease its leverage, it will call its old bomds and replace them with new 8% coupon bonds. The company will sell or purchase stock at the new equilibrium price to complete the the capital structure change. The firm pays out all earnings as dividends; hence its stock is zero-growth stock. Its current cost of equity, r-s, is 14%. If it increases leverage, r-s will be 16%. If it decreases leverage, r-s will be 13%. What is the firm's WACC and total corporate value under each capital structure?
In the spot market, 10.5 Mexican pesos can be exchanged for 1 United State dollar. A compact disc costs $15 in the United States.
the operations management team evaluated ranked and recommended a set of capital projects using evaluation tools such
The manufacturing equipment will be sold off a the end of the eight years for $210,000, and the cost of capital for this project is 14%.
At the beginning of the year, an 80 percent owned subsidiary acquired a parent's bonds from unaffiliated parties at a gain of $20,000.
Damon Enterprises' stock is currently selling for $25.00 per share. The stock's dividend is projected to increase at a constant rate of seven percent per year.
Mill Due Corporation is expected to pay a dividend of $5.00 per year on its common stock forever into the future. It has no growth prospects whatsoever.
Determine the market rate of interest for a bond with the following characteristics: the bond pays a 7% coupon (semi-annually),
Describe why purchasing stocks with lowest price or earnings per share ratios may or may not be a good investment strategy.
At the same time, the income statement shows net income of $780,000. The company paid dividends of $397,800 and has 120,000 shares of stock outstanding. If the benchmark PE ratio is 29, what is the target stock price in one year?
You're the sole owner of Duarte Spring Company; you paid $200K for the business when you acquired the firm five years ago. Duarte is a manufacturer of high-end springs used by major aerospace and aircraft manufacturing companies.
Explain Construction of choice table for interest rate and Which alternative should be selected
The bonds are selling at 97.5% of face value. The company's tax rate is 33%. What is Jake's weighted average cost of question.
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