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2. Two firms, Charcoal and 8-Down, both produce soft drinks (sodas). The price of a soda is $1.20 each. Charcoal has total fixed costs of $750,000 and variable costs of 30 cents per soda. 8-Down has total fixed costs of $400,000 and variable costs of 50 cents per soda. The corporate tax rate is 40%. If the economy is strong, each firm will sell 2,000,000 sodas. If the economy enters a recession, each firm will sell 1,400,000 sodas. a. In a recession, what are the total costs to Charcoal and to 8-Down? b. In a recession, what is the pre-tax profit and tax paid of Charcoal and 8-Down? c. In a strong economy, what is the pre-tax profit of Charcoal and 8-Down? d. In a strong economy, what is the tax paid by 8-Down?
financial distress good time plc is a regional chain department store. it will remain in business for one more year.
What is the change in the expected return of the firm due to the announcement?
The company's cost of capital is the cost of debt is 4.61, the cost of common equity is 5.23, and cost of preferred equity is 6.67. What is the company's weighted average cost of capital?
Given that the first dividend [ayment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3 and then sum these PVs.
BioCom has two outstanding bond issues. Bond 1 matures in six years, has a par value of $1,000, has a coupon rate of 7% paid semiannually, and now sells for $1,031.
Interest cost Fixed cost financing $ Variable short-term financing $ (b) Which plan is less costly? Short-term plan Fixed cost plan.
1. What is a lower bound for the price of a 4-month call option on a non-dividend -paying stock when the stock price is $43.77, the strike price is $36, and the risk-free interest rate is 5% per annum?
Suppose you observe that the stock is selling for $50.00 per share, and that this is the best estimate of its equilibrium price. What would you conclude about either (i) your estimate of the stock's required rate of return; or (ii) the CFO's estim..
Using the Ken French daily data on the market risk premium Rm-Rf back to 1926 (posted in UBLearns), sort the returns and estimate the standard deviation.
What's the standard deviation of the expected return? Show your calculations.
Using the data in the following table, and the fact that the correlation of A and B is .00073, calculate the volatility (standard deviation) of a portfolio that is 60% invested in stock A and 40% invested in stock B.
What is your interpretation of the relationship between risk and return? Describe the relationship by comparing the risk/return levels for U.S. securities versus foreign securities.
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