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Star Corporation has a target capital structure of 30 percent common stock, 10 percent preferred stock, and 60 percent debt. Its cost of equity is 14 percent, the cost of preferred stock is 8.0 percent, and the pre-tax cost of debt is 7.0 percent. What is the firm's WACC given a tax rate of 35 percent? (Ch14)
a. 7.73 percent
b. 9.12 percent
c. 9.78 percent
d. 10.38 percent
e. 11.18% percent
You open a brokerage account and purchase 200 shares of Google at $443.05 per share. You borrow 40% from your broker to help pay for the purchase. The interest rate on the loan is 8%. Assume the day after your stock purchase, Google announces abys..
A brand new car! Sarah Lee is buying a new car and must borrow money for it. (You must choose a vehicle for her and research how much it costs.) She wants a 6-year car loan and has two choices. How much does Sarah pay per year in each case? Which le..
Suppose that zero interest rates with continuous compounding are as follows: - Calculate forward interest rates for the second, third, fourth, fifth, and sixth quarters.
Discuss different ways to invest in the futures markets available to investors. How should the novice investor put money into the futures markets? How should the sophisticated investor invest in the futures markets? Discuss the potential risk, reward..
A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 6.2 percent paid annually and matures in 18 years. What is the yield to maturity of this bond?
Broussard Skateboard's sales are expected to increase by 25% from $7.8 million in 2015 to $9.75 million in 2016. Its assets totaled $3 million at the end of 2015. Broussard is already at full capacity, so its assets must grow at the same rate as proj..
The real risk-free rate is 1.5 percent. Inflation is expected to be 3.5 percent this year, 4 percent next year, and 5 percent thereafter. The maturity risk premium is estimated to be 0.08 ´ (t - 1)%, where t is the number of years to maturity. What i..
Emporia Mills management is evaluating two alternative heating systems
In comparing the internal rate of return and net present value methods of evaluation.
Equipment is purchased for $1,500,000 (no salvage value). The company uses straight line depreciation for 9 years. Assume no other fixed assets. What is the accumulated depreciation at end end of year 4?
Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds.
Submit the Financial Section of the Business Plan. Your submission should include the following sections/pages: 1. Your start up costs 2. Start up costs assumptions 3. First year costs by month 4. Assumptions for first year costs 5. Years 2 and 3 cos..
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