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QUESTION 1Suppose a company will issue new 5-year debt with a face value of $1,000 and a coupon rate of 8 percent, paid annually. If the issuing price is $1080 and the tax rate is 40 percent. What is the after-tax cost of debt? If the expected rate of return of the company’s common stock is 18 percent and the company’s target capital structure is 3:7. What is the firm’s WACC?
QUESTION 2In 2009 the earning per share of SOUAET Ltd was $1.5. The company was considering a stock dividend of 10 to 10 shares. On the day of record, the market price of its shares was $30. The comments of a financial analyst are: “P/E ratio of SOUAET is 20 based on the current stock price. After the stock dividend payment, the stock price will decrease to $10 and P/E ratio will decrease to 10 as well. Thus SOUAET is more valuable for investment. Please state the financial analyst’s comments on P/E ratio is correct or not and provide the reasons.
How would you hedge the account receivable (A/R) using the Forward Market, Money Market and the Options market? Calculate the U.S. dollar equivalent of the hedged amount of the account receivable, for each method write out the steps and amounts..
a. what is meant by the factoring or securitization of receivables?b. what does selling receivables with recourse mean?
You discover an antique in your attic that you purchased at an estate sale 10 years ago for $400. You auction it on EBay and receive $8,000 for your item. What annual rate of return did you earn?
A portfolio has a variance of ri .017424, a beta of 1.06, and an expected return of 13.15 percent. What is the Sharpe ratio if the expectedsk-free rate is 3.4 percent?
Mary Francis has just returned to her office after attending preliminary discussions with investment bankers. Her last meeting regarding the intended capital structure of Apix went well, and she calls you into her office to discuss the next steps.
Explain the concepts of income measurement and their implications for analysis of operating activities Describe ways to analyze revenue and expense recognition and discuss possible risks for financial analysis
You're considering an investment in US Treasury bond but aren't sure what rate of interest it should pay. What rate of interest should US treasury bond pay?
Does the office renovation and subsequent lease agreement appear to be a good investment investment for the company? (Hint: Compare the cost of renovation with the present value of the lease payments. Use a 10 percent discount rate for the analysi..
Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?
jane doe earns 30000 per year and has applied for an 80000 30-year mortgage at 8 percent interest paid monthly.
Computation of Internal Rate of Return and The system will be depreciated straight-line to zero over its 5-year life
What does it mean to screen a venture opportunity?
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