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If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.15. The company has a target debt–equity ratio of .6. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 3.6 percent. The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 8.2 percent. The bond currently sells for $1,140. The corporate tax rate is 35 percent. a. What is the company’s cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of debt % b. What is the company’s cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of debt % c. What is the company’s weighted average cost of capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) WACC % ReferenceseBook & Resources
Private colleges and universities rely on money contributed by individuals and corporations for their operating expenses. Much of this money is put into a fund called an endowment, and the college spends only the interest earned by the fund. Calculat..
Discuss the importance of using linear programming. Provide a business example as to how this type of analyiscould be used
The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..
According to the tax effect theory, investors prefer dividends and, as a result, the higher the payout ratio, the higher the value of the firm. According to the dividend preference (bird-in-the-hand) theory, investors prefer cash to paper (stock), so..
KatyDid Clothes has a $130 million (face value) 25-year bond issue selling for 104 percent of par that carries a coupon rate of 10 percent, paid semi annually. What would be Katydid’s before-tax component cost of debt?
A bond that matures in 15 years has a $1,00 par value. The annual coupon interest rate is 8% and the market's required yield to maturity on a comparable-risk bond is 16 percent. a) What could be the value of this bond if it is paid interest annually?..
Giant Enterprises’ stock has a required return of 14.8%. The company, which plans to pay a dividend of $2.60 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over the..
Leila Liverpool is looking into the possibility of buying several coin-operated vending machines and placing them in the local hospitals. Each machine costs $3200, which she will depreciate on a straight-line basis over 10 years. Assume that the inco..
Considering the risk around the cost point estimate, what type of contract will generally be used for the contracted effort?
Assume you buy a bond, hold it until it matures, and the issuer makes all payments. Your return on the bond will
A City Tech student purchased a new 3D 4K HDTV on Cyber Monday that was selling for $3,500. He signed a financing deal to make a down-payment of $1,000 and then to make 24 monthly payments of $150, beginning one month from the time of purchase. Compu..
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 3.8% r2 = 4.2% r3 = 4.9% r4 = 5.7% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
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