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The total book value of the firm’s equity is $20 million; book value per share is $40. The stock sells for a price of $30 per share, and the cost of equity is 12%. The firm’s bonds have a face value of $8 million and sell at a price of 115% of face value. The yield to maturity on the bonds is 6%, and the firm’s tax rate is 30%. Find the WACC of William Tell Computers. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Explains what happens to a firm’s break-even point if it is able to lower its fixed operating costs but keeps its variable operating costs per unit constant.
The spot €:$ is equal to 1.1795. The one-year interest rates on the Eurocurrency market are 4% in Euros and 5% in U.S. dollars. What is the one-year forward exchange rate?
Electronics Galore has historically had a P/E ratio of 23.4. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $1.68. These earnings are expected to increase by 4.2 percent next year. What is the expected pri..
Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, as compared to 5 percent for the past year. Will security prices increase, decrease, or stay the sam..
The yield of strawberry plants depends on the amount of fertilizer fed to the plants. Agricultural research shows that an acre of strawberry plants will yield 500 pounds of strawberries when 50 cubic feet of fertilizer are applied. If 70 cubic of fee..
F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but it would like to add some debt to take advantage of low interest rates and the tax shield. Based on this information wh..
What is the major determinant of bond prices? Explain your answer. The ABC bond carries a 6.5% semi-annual coupon rate and matures in 23 years. If the market yield on these bonds is 8%, calculate the price of the bond. If interest rates (yields) do n..
Calculate the total dollar-day float for the month, calculate the average dollar-day float, calculate the average collection float in days and calculate the annual cost of float assuming an annual opportunity costs of 6%.
Marsha is ready to start a business that will generate about 150k of earnings each year. Marsha will work full time for the business. Her plan is to withdraw 100k of earnings from the biz each year. What will be the total entity and personal tax cost..
You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $2,356 and you have made every payment on time. The original term of the mortgage was 30 years, and the m..
How would you analyze and interpret the data?
Matsumoto Limited (ML), a large conglomerate firm. Compute the marginal cost of capital schedule for ML, and determine the break points in the schedule.
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