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Five Rivers Casino is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Gamblers flotation expense on the new bonds will be $50 per bond. Gamblers marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds.
I understand that B is at more risk but not understanding what the formula would be to come up to the rM and beta coefficients of A and B.
What will be the debt-to-equity ratio after each contemplated restructuring?
IBM just paid a $2 dividend. The required rate of return for IBM stock is 22 percent. If a value of a share of IBM is expected to be $82.1516 at the end of year 2, Calculate IBM's expected growth rate?
You earned 26.3 percent on your investments for a time period when the risk-free rate was 3.8 percent and the inflation rate was 3.1 percent. What was your real rate of return for the period?
Discuss the primary responsibilities of a corporate financial staff.
Barrett Corporations invests a large sum of money in R&D; as a result, it retains and reinvests all of its receiving. Barrett does not pay any dividends and it has no plans to pay dividends in the near future.
Coccia Co. wants to issue new 16-year bonds for some much-needed expansion projects. The company currently has 8 percent coupon bonds on the market that sell for $1,065, make semiannual payments, and mature in 16 years.
You need to show all the steps involved to derive your final answer. If you come to the correct conclusion but do not show all/any necessary steps, you will not earn all/any points on this project.
If the only violation of the M&M assumptions is that investors face one tax rate for interest income and another tax rate for equity income, what is the implication for the optimal capital structure of a corporation?
What is the relationship between the future value factor for five years at 5 percent and the present value factor for five years at 5 percent?
Myers Business Systems is estimating the introduction of a new product. The possible levels of unit sales and probabilities of their occurrence are listed below:
Given the break-even EBIT and the expected annual EBIT of FC, should the firm take on debt equal to 40% of its levered value or not? Justify your answer.
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