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The target capital structure of Orange Corporation is 40 percent common stock, 10 percent preferred stock, and 50 percent debt. Orange Corporation is issuing new common stock at a market price of $52. Dividends last year were $6.30 and are expected to grow at an annual rate of 6% forever. Flotation costs will be $5 per share.
Orange Corporation is issuing a bond. Before-tax cost of debt is 12.87%. The firm's tax rate is 34%.
The preferred stock of Orange Corporation sells for $49 and pays $4.90 in dividends. Flotation costs will be $5 per share.
a) What is Orange's cost of common equity?
b) What will be the Orange's after-tax cost of debt on the bond?
c) What is the Orange's cost of capital for the preferred stock?
d) What is the Orange's weighted average cost of capital?
The fair value of all Hathaway's identifiable tangible and intangible assets was $48,000,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition?
Determine the taxpayer's gross income for tax purposed in each of the following situations:
The United States' Financial Reputation on an International Level
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A project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate, what is the after-tax incremental cash flow? Should the project be accepted or rejecte..
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There is a $40,000 realized gainon the sale of the land and no realized gain or loss on the sale ofthe bonds. Are the tax consequences to Ivan and Grace the same for each of the five years? Explain.
On December 1, 2010, the company declared a cash dividend of $2 per share which will be paid in cash on January 15, 2011. The annual accounting period ends December 31. Prepare the appropriate journal entries on each date.
Explain why the IASB has proposed the changes, including a discussion of the advantages and disadvantages of fair value measurement.
Investment in working capital needed to service the project is treated in the net present value method as:
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