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Delta Corporation has 5.5 million shares of common stock outstanding. The common stock currently sells for $45 per share and has a beta of 1.10. Delta Corporation has also 60,000 bonds outstanding per value $ 1,000 each, and 7.6 percent semiannual coupon rate. The bonds have 10 year to maturity and sell for 75 percent of par. • Tax rate is 39 percent. • The market risk premium is 6.5% • T-bills are yielding 7 percent
a) What is the company’s market value structure?
b) What is the company’s cost of equity (Re)?
c) What is the company’s weight average cost of capital (WACC)? d) If Delta is evaluating a new investment project that has the same risk as the company’s typical project, what rate should the company use to discount the projects cash flows?
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Tracy Morgan Productions has 80,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 6.75 percent. The company also has 750,000 shares of 7 percent preferred stock and 2.5 million shares of common stock outst..
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Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7%. The bid for each share should range between $ ___..
When the level of working capital is increased, all of the following are expected to occur except
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