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David Ortiz Motors has a target capital structure of 35% debt and 65% equity. The yield to maturity on the company's outstanding bonds is 11%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.54%. What is the company's cost of equity capital? Round your answer to two decimal places.
What is the accounting break-even level of sales if the firm pays no taxes? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Calculate the value of a 3-month European put option on the stock with an exercise price of $40. - Verify that no-arbitrage arguments and risk-neutral valuation arguments give the same answers.
A European call option and put option on a stock both have a strike price of $55 and an expiration date in two months. Both sell for $5. The risk-free interest rate is 10% per annum, the current stock price is $60, and a $2 dividend is expected in on..
Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $8 and are currently selling for $86 a share. What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% ma..
McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases. What is the days sales outstan..
Compute the Rate of return on stockholders' equity, Price/earnings ratio for common stock and Dividends paid per share of common stock for 2011.
A portfolio manager in charge of a portfolio worth $50 million is concerned that the market might decline rapidly during the next six months and would like to use options on the S&P 100 to provide protection against the portfolio falling below$45 mil..
Identify ALL insurance coverage’s you will need to bind for the business. Be specific about the details of any aviation related coverage’s. Business grows and soon you find it hard to maintain the increasing pace. You need to hire a part time pilot t..
It is now the beginning of a year. Jared is considering the purchase of a 7.5 percent (coupon rate), 15-year bond that is presently priced to yield 11 percent (i.e. market interest rate is 11 percent). Based on extensive analysis of market interest r..
Using CAPM: A stock has a beta of 1.3 and an expected return of 15 percent. A risk free asset currently earns 5.5 percent. What is the expected return on a portfolio that is equally invested in the two assets?
Determine the (after-tax) percentage cost of a $50 million debt issue that the Mattingly Corporation is planning to place privately with a large insurance company. Asume that the company has a 40% marginal tax rate. The long term debt issue will yiel..
SOUTHEASTERN SPECIALTY, INC. (SSI), is a for-profit corporation formed by physicians in the College of Medicine at Southeastern University. Calculate the expected rate of return on each of the five investment alternatives listed in Exhibit 1. Based s..
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