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Cost of Common Equity and WACC Palencia Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock. Its before-tax cost of debt is 13% and its marginal tax rate is 40%. The current stock price is P0 = $33.00. The last dividend was D0 = $2.25, and it is expected to grow at a 8% constant rate.
What is its cost of common equity and its WACC? Round your answers to two decimal places. Do not round your intermediate calculations.
rs = %
WACC = %
Folic acid inc. has $20 million in earnings pays $2.75 million in interest to bondholders and $1.80 million in dividends to preferred stockholders. a) What are the common stockholders residual claims to earnings? b) What are the common stockholders l..
XYZ Enterprises is considering the purchase of a new machine for $75,000 this year, to improve its packaging system . The machine has a 7-year recovery period and is expected to have a salvage value of $5,000. Develop a depreciation schedule for this..
Consider two streams of cash flows, A and B. Stream A’s first cash flow is $8,900 and is received three years from today. Future cash flows in Stream A grow by 4 percent in perpetuity. What is the present value of each stream? b) Suppose that the two..
Much discussion lately has been concerned with whether or not the FEDs should raise interest rates. How would high rates reduce risk-taking? How would low rates encourage investment?
On August 1, 2014, Dambro Company acquired 800, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2014, and mature on April 30, 2020, with interest paid each October 31 and April 30. Account for this bonds as Held to maturity ..
Average annual net income divided by original investment amount equals: Select one:
Proposal would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash. It is estimated that establishing these collection centers would reduce the average ..
Harley Motors has $17 million in assets, which were financed with $3.4 million of debt and $13.6 million in equity. Harley's beta is currently 1.85 and its tax rate is 35%. Use the Hamada equation to find Harley's unlevered beta, bU.
One year from today, investors anticipate that Groningen Distilleries, Inc, stock will pay a dividend of $3.25 per share. After that, investors believe that the dividend will grow at 20% per year for three years before settling down to a long-run gro..
A project currently generates sales of $10 million, variable costs equal to 50% of sales, and fixed costs of $2.1 million. The firm’s tax rate is 40%. The project will last for 10 years. The discount rate is 11%. What is the effect on project NPV, if..
Investment companies are specialized financial intermediaries that provide financial services to businesses. These investment companies include: (check all that apply)
This week's question focuses on cost allocation. A major manufacturer decided to put one of its divisions up for sale because managerial information showed the components produced by this division is losing money. Why do you think the division was pr..
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