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Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has an embedded cost of 9 percent annually.
What is the company’s pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Pretax cost of debt %
If the tax rate is 35 percent, what is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Aftertax cost of debt %
Suppose that IBM bonds have a face value of $1,000 and are currently trading in the marketplace today for $1250.14. These bonds are trading at a ______ relative to the _______.
A 10 year bond has semi-annual coupons. The coupon rate is 5% for the first 5 years and 9% for the following 5 years. The bond has face amount of 100 and a redemption amount of 105. Six months before the first coupon, the bond is purchased for 100. C..
Brianne plans to deposit $100,000 today into a fund that will be needed at the end of 6 years. She will receive 12% interest on the fund balance. What is the fund balance at the end of year 6 assuming semi annually compounding?
A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation of return of 5% while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .2778. Stock A comprises 40% of t..
Winnebagel Corp. currently sells 24,000 motor homes per year at $62,000 each, and 9,000 luxury motor coaches per year at $99,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 19,000 of these..
The Pilson Company has an election coming. The company will be electing 5 persons to its board of directors. Pilson uses cumulative voting. There are 100,000 voting shares outstanding. A small group of shareholders has gotten together and discovered ..
A basketball player has just signed a $30 million contract to play for three years. She will receive $5 million as an immediate cash bonus, $5 million at the end of the first year, $8 million at the end of the second year, and the remaining $12 milli..
A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. However, Sto..
Go to a financial Web site, such as finance.yahoo.com, google.com/finance, or moneycentral.msn.com. Obtain information on the yields and maturity for: U.S. treasuries, Municipal bonds, Corporate bonds
The standard deviation of the past five monthly returns for PG Company is 2.75 percent, -0.75 percent, 4.15 percent, 6.29 percent, and 3.84 percent. What is the average monthly return?
If the risk-free rate is 3 percent and the risk premium is 5 percent, what is the required return? and identify which financial securities return is typically considered the risk free rate?
The next dividend payment by ECY, Inc., will be $1.88 per share. The dividends are anticipated to maintain a growth rate of 4 percent, forever. ECY stock currently sells for $37 per share. What is the required return?
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