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A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.4%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
Explain What is the reasonable cost of capital for average and high and low risk projects Suppose a firm estimates its WACC to be 10 %.
Heavy Metal Corporation is expected to generate the following free cash flows over the next 5 years:
Her tax rate is 35%. Calculate the expected Operating Cash Flow [OCF] for the first year.
Another company, Bohenick Classis Automobiles restores and rebuilds old classic cars. This company purchase and restored a classic 1957 Thunderbird convertible 7 years ago for $9,300.00. Today at auction, the car sold for $102,300.00.
Compute the total bond interest expense over the bond's life. Prepare an effective interest amortizatoin table. Prepare the journal entries to record the first two interest payments.
Within the first hour of trading, the stock was selling for $23.20 a share. What was the flotation cost as a percentage of the funds raised?
Explain decision making on the basis of the net present value criterion and profitability index of a project with a net investment of $20,000
What are some economic conditions (including international aspects) that affect the cost of money?
A proposed project can generate savings of $1000 per year for ten years. The initial cost of the project is $2500 and the project has a salvage value of $500 in the 10th year.
Dividends reinvested are not subject to federal income tax. The value of a stock depends in part on future dividends and on the investors' required return
Easy Tech Software Corporation is evaluating the production of a new software product to compete with the popular word processing software currently available.
If the returns required by investors are 10 percent, 11 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital's after-tax WACC? Assume that the firm's marginal tax rate is 40 percent.
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