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Cost of Financing. Morgan Corporation must obtain $8 million in financing for its expansion plans. The firm's credit rating is good. Common stock is now selling at $50 per share. Preferred stock has a dividend rate of 15 percent. Long-term debt has an interest rate of 19 percent. The tax rate is 46 percent.
Applicable ratios for Morgan and the industry are:
Industry
Morgan
Net income to total assets
15%
24%
Long-term debt to total assets
29%
26%
Total liabilities to total assets
48%
44%
Preferred stock to total assets
4%
0
Current ratio
3.1
3.8
Net income plus interest to interest
9
15
Dividends per share are $6. The growth rate in dividends is 5 percent, there is no sinking fund provision, net income and sales show stability, and the current ownership group wants to maintain its control.
(a) What is the cost of common stock?
(b) What is the cost of preferred stock?
(c) What is the cost of long-term debt?
(d) What source of financing is recommended?
Construct payoff and profit diagrams for the purchase of a 950-strike S&R call and sale of a 1000-strike S&R call. Verify that you obtain exactly the same profit diagram for the purchase of a 950-strike S&R put and sale of a 1000-strike S&R
How many rights could Todd buy with his $4,800? Alternatively, how many shares of stock could he buy with the same $4,800 at $66 per share?
How many shares will remain after the repurchase? Round your answer to the nearest whole number.
Use the interest rate model to estimate market rates on the firm's debt securities of the following terms: 1 to 5 years, 10 years, and 20 years.
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katz corporation has issued 400000 shares of common stock and holds 20000 shares in treasury. the charter authorized
1. what role do financial institutions play within the global marketplace? 2. how can policies and regulations impact
Suppose on August 15, the spot S&P 500 index is also 1,150 (the same as its December futures). Is there an opportunity for index arbitrage on this day? Why?
considering genesisrsquos aggressive growth plan sensible essentials suggested that its client should broaden the scope
A venture capitalist wants to estimate value of a new venture. The venture is not expected to produce net income or earnings until the end of year five when the net income is estimated at $1,600,000.
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You plan to work on a master's and perhaps a PhD. If graduate school costs $24,580 per year, approximately how long will you be able to stay in school based on these funds?
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