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Micro Spinoffs, Inc., issued 10-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,210. The firm’s tax bracket is 20%. Micro Spinoffs also has preferred stock outstanding. The stock pays a dividend of $5 per share, and the stock sells for $50. Micro Spinoffs’s cost of equity is 12%. What is its WACC if equity is 50%, preferred stock is 10%, and debt is 40% of total capital? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Some years ago, Y purchased a $100,000 universal life policy on his own life. Two years ago, he sold the policy to his cousin for the policy’s gift tax value of $40,000 as determined by government rules.
What are the differences between foreign bonds and Eurobonds and why Eurobonds make up the lion’s share of the international bond market?
A bank plans to reduce its holdings of liquid assets but at the same time it does not with to increase its liquidity risk. What and how can the bank do to achieve its wishes? Please list and clearly explain a little bit.
Discuss the impact of each of the following on prepayment risk for a mortgage backed pass through security (MBS): a. High coupon interest MBS versus low coupon interest MBS b. MBS issued six years prior versus MBS issued this year c. Demographic tren..
Estimate the interest rate paid by P&G on the 5/30 swap in Business Snapshot 5.4 if (a) the CP rate is 6.5% and the Treasury yield curve is flat at 6% and (b) the CP rate is 7.5% and the Treasury yield curve is flat at 7% with semi-annual compounding..
Steve is about to retire and wants to calculate the total worth of his retirement assets. He has a corporate pension paying $2250 at the beginning of every month. He is also entitled for Social Security benefits of $1450 at the beginning of every mon..
It is said that global stock markets are intertwined/connected and that market performance in one part of the world could have fundamental impacts or influences on the markets in other parts of the world (contagion). This phenomenon was recently exhi..
Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), but, decline by 1% per year after until you settle to a long -run growth rate of 4%. You expect EBIT to be 9% of sales, increases in net working capital r..
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 88,000 3 102,000 4 97,000 5 78,000 Production of the implants will require $1,540,000 in net working capital to star..
Three years ago, you purchased a bond for $974.69. The bond had three years to maturity, a coupon rate of 8% paid annually, and a face value of $1,000. Each year you reinvested all coupon interest at the prevailing reinvestment rate shown in the tabl..
Consider the following cash flow [-100, + 230, -132]. We want to decide under what range of discount rate this is an advantageous investment. But noting the change in sign, we conclude IRR is not a suitable instrument.Write the expression for NPV usi..
David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 7.20%, and the company's tax rate is 35%. Ortiz's CFO has calculated the company's WACC as 10.95%. What is the c..
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