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Global Pistons? (GP) has common stock with a market value of $460 million and debt with a value of $241 million. Investors expect a 16% return on the stock and a 9% return on the debt. Assume perfect capital markets.
a. Suppose GP issues $241 million of new stock to buy back the debt. What is the expected return of the stock after this? transaction?
b. Suppose instead GP issues $51.37 million of new debt to repurchase stock.
i. If the risk of the debt does not? change, what is the expected return of the stock after this? transaction?
ii. If the risk of the debt? increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part (i?)?
Winnebagel Corp. currently sells 28,500 motor homes per year at $75,500 each and 7,500 luxury motor coaches per year at $117,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,500 of these..
If the current exchange rate is 113 Japanese yen per U.S. dollar and the price of a Big Mac hamburger in the United States is $3.41, the yen price of a Big Mac hamburger in Japan is? How to show the work?
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Dane purchased 3000 shares of a mutual fund at an offer price of $6.03 per share. Later, he sold the investment for $3.64 per share. During the time Dane owned the shares, the fund paid a dividend of $0.52 per share. What was his return on investment..
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Given the following information, calculate the Effective Borrowing Cost (EBC). Loan amount: $175,000, Term: 30 years, Interest rate: 7 %, Payment: $1,164.28, Discount points: 1, Origination fee: $3,250. Assume the loan is held until the end of year 1..
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