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Percy's Wholesale Supply has earnings before interest and taxes of $121,000. Both the book and the market value of debt is $190,000. The unlevered cost of equity is 14.7 percent while the pretax cost of debt is 8.6 percent. The tax rate is 35 percent. What is the firm's weighted average cost of capital?
Whats the bonds new price and How does the price compare with your answer in part a? Why did the bond's value change?
Explain how the relationship between the UK interest rate and the Canadian interest rate changed from the beginning of the month until the end of the month.
Will an MNC issuing debt in low-interest-rate currencies necessarily lower its cost of funds? Why?
Compare and contrast the three different theories of money demand. Given the quantitative theory of money, What happens to real GDP if the money supply is cut in half, velocity is stable and prices are sticky? What happens to prices if the money supp..
ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $682,242, total cash expenses $341,299, depreciation $32,351, taxes 27%. What are the operating cash flows?
You woke up one morning in a cold sweat, because you haven’t been saving anything for retirement. You plan to retire in 30 years (at the end of year 30) and would like to have $1.5 million on the day that you retire. What if instead of having a lump ..
An unlevered firm has a value of $700 million. An otherwise identical but levered firm has $130 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax r..
April wants to create a scholarship fund by making annual savings donations to the fund for several years before the fund starts making annual scholarship payments forever. She plans to save 22,900 dollars per year in the trust fund for 5 years.
Junkman's Warehouse and Storage Company has an unusual bond outstanding with three years remaining until maturity. The bond is unusual because the annual coupon payments remaining are $100, $200, and $300 and the face value of the bond is $1,200. Wha..
You purchased a machine for $750,000 (installed), and you depreciated it using a 7 year MACRS. This machine generates $300,000 in revenue. In the prior problem, assume that you have a 12% MARR, What is your NPW and IRR? NPW? You think that you need $..
A family trust will convey property to you in 15 years. If the property is expected to be worth $50,000 when you receive it, what is the present value of your interest, discounted at 10 percent annually?
a) The price of a 1-year zero is $96.00, the price of a 2-year 10% coupon bond is $107.30 and the price of a 3-year 8% coupon bond is $102.25. Use the bootstrap method to calculate all zero rates. Given the bonds in (a), what is the price of a 3 year..
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