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David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.08%. What is the company's cost of equity capital? Round your answer to two decimal places.
Suppose the dividends for the Seger Corporation over the past six years were $1.49, $1.57, $1.66, $1.74, $1.84, and $1.89, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 –$43,000,000 1 67,500,000 2 –18,000,000 Required: (a) If the company requires a 11 percent return on its investments, what is the NPV o..
Compute the Macaulay duration of a ten-year 6% $1,000 bond having annual coupons and a redemption of $1,200 if the yield to maturity is 8%.
Explain why so many international transactions require international trade credit facilitated by commercial banks. Explain the difference in the risk to the exporter between accounts receivable financing and factoring.
a. Find the expected number of people who arrive before you.b. Find the variance of the number of people who arrive before you.
After a banner year of rising profits and positive stock returns, the managers of Raptor Pharmaceuticals Corporation (RPC) have decided to launch a seasoned equity offering to raise new equity capital. Calculate the return earned by RPC's existing st..
Steve and Styles (S&S) are constructing its Marginal Cost of Capital (MCC) schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. What is S&S cost of preferred stock?
Suppose that the annual growth in real income in Japan is expected to be between 2 and 3 percent and that income elasticity of demand for housing in Tokyo is estimated to be between 0.8 and 1.0 for rental units and between 0.7 and 1.5 for owner-occup..
Microsoft has a beta estimate (long term average) of 0.95. This not what is expected since high technology companies usually have a high risk and have betas of more than 1. Using the CAPM, please calculate the cost of equity (rE) of Microsoft and Ver..
A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5 percent over the last 15 years and you expect this to continue. (LG 3-3) If the required rate of return on the stock is 12 percent, what ..
A firm is expected to pay $2 dividend per share in year 1 (D1=$2) and the dividend is expected to grow at a constant rate of 5%. If the firm's stock price is $28.64 based on the constant growth model, what is the required rate of return on the stock?
A manufacturer of aerospace products acquired a new multispindle, multi-turret turning center for $250,000. The machine will generate new revenue of $80,000 per year. Operating costs for the machine will average $10,000 per year. Suppose that the est..
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