What is the firm's cost of equity estimate according to the DCF method and what is the cost of equity estimate according to the CAPM - What is the firms corporate cost of capital?
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Remington’s has a market value equal to its book value. Currently, the firm has excess cash of $1,200, other assets of $5,800, and equity valued at $3,750. The firm has 250 shares of stock outstanding and net income of $420. What will the new earning..
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When the required rate of return on a bond equals its coupon rate, the bond will sell at its par value. When interest rates rise, bond prices on outstanding issues fall. When interest rates fall, bond prices on outstanding issues rise.
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A bank borrows money at the 5 year CD rate found in the paper with daily compounding. It loans money at the 15 year mortgage rate in the paper which is compounded monthly. If the bank borrows $10,000,000 from depositors and loans the $10,000,000 out ..
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A corporation’s pretax net income of $1,000,000 is taxable based on 30% of the first $300,000, 35% of the next $300,000, and 40% of the balance: What is the corporation’s average tax rate? What is the corporation’s marginal tax rate?
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On February 18, 2014, Q-Car Corporation announced its plan to acquire 90% of the outstanding 1,000,000 shares InstaPower Corporation’s common stock in a business combination later in the year following regulatory approval. What is the total considera..
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Consider the following projects, A and B where the firm can only choose one. Project A costs $30 and has cash flows of $5, 10, 15, 20 in each of the next four years. Project B also costs $30, and generates cash flows of $20, 10, 8, 6 for the next fou..
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Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
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The FTSE 100 is an index of the 100 largest market capitalization stocks traded on the London Stock Exchange. You think that 100 stocks are too much to keep up with, so you want to drop that number to 75. By doing this, what is the percentage drop in..
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If the economy booms, RTF, Inc. stock is expected to return 10 percent. If the economy goes into a recessionary period, then RTF is expected to only return 2 percent. The probability of a boom is 66 percent while the probability of a recession is 34 ..
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Imagine that you are the product manager for a new electric car similar to the Chevrolet Volt or Toyota Prius. Using all of your knowledge of the new product life cycle, speculate on the stages of the life cycle your electric car will pass through, b..
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Last year, you purchased a stock at a price of $53 a share. Over the course of the year, you received $2 in dividends and inflation averaged 2.8 percent. Today, you sold your shares for $53.9 a share. What is your approximate real rate of return on t..
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