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Suppose your company needs $14 million to build a new assembly line. Your target debt?equity ratio is 0.50. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 7 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small
What is your company's weighted average flotation cost, assuming all equity is raised externally?
What is the true cost of building the new assembly line after taking flotation costs into account?
A fund has expected risk premium of 8% and an expected SD of 20%. T-Bill is 3%. Utility function is U=E(r)-2.5SD^2. What percentage of risky portfolio will maximize utility
Genuine Producs Inc. requires a new machine. Two companies have submitted bids, and you have been assigned the task of choosing one machine.
All of General Hospitals debt is at an inerest rate of 7.5% on its debt. It is in the 35% tax bracket. 30% of its funding is debt. 70% of its funding is equity, which costs 12%.
a bank can borrow or lend LIBOR. suppose that the six- month rate is 2% and the nine- month rate is 3%. The rate that can be locked in for the period between six months and nine months using an FRA is 4%.
ABC has a twenty year bond that has just been issued with an 8% coupon rate. It pays interest semiannually and has a par value of $1000. It may be called in five years at a price of $1040.
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter's management is considering a lockbox system to reduce the firm's collection times.
Petroleum Inc. (PI) controls offshore oil leases. It is considering the construction of a deep-sea oil rig at a cost of $500 million. The price of oil is $100/bbl. and extraction costs are $50/bbl.
To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 86,000 shares of common stock.
YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each. when the incremental revenues and expenses are analyzed, which is the financial impact?
A firm in the third year of depreciating its only asset, which originally cost $180,000 and has a 5-year MACRS recovery period, has gathered the following data relative to the current year s operations.
US firm X wants yens. It can borrow yens at 5% and can borrow dollars at 10%. Japanese firm Y wants dollars. It can borrow dollars at 12% and can borrow yens at 6%. You are the swap bank.
Miiler Manufacturing has 4 million shares of commonstock outstanding. The currentshare price is $76, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding.
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