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Mirha Corp's target capital structure consists of 40% debt and 60% common equity and its federal-plus-state tax rate is 40%. The firm must raise additional capital to fund its latest expansion. The company will have $3 million of retained earnings with a cost of 12%. New common stock in an amount of $9 million would have a cost of 15%. In addition, Mirha can raise up to $4 million of debt at an interest rate of 10% and an additional $5 million at a rate of 12%. Mirha Corp’s CFO expects that the proposed expansion will required an investment of $7.2 million. What is the wacc for this expansion project if Mirha expects to maintain its target capital structure?
Assume that the average firm in your company's industry is expected to grow at a constant rate of 5% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
Suppose that the value of the Thai baht depreciates by 6% from the Japanese point of view. What is the percentage appreciation/depreciation of the yen from the Thai point of view?
The industry-low, industry-average, and industry-high cost benchmarks on pp. 5-6 of each issue of the GLO-BUS Statistical Review
Mullineaux Corporation has a target capital structure of 63 percent common stock, 8 percent preferred stock, and 29 percent debt. Its cost of equity is 14.3 percent, the cost of preferred stock is 7.3 percent, and the cost of debt is 9 percent. The r..
A stock has a beta of 1.2 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a beta of 0.8, wha..
What might be different about RadioShack’s unhappy ending if it would have made different decisions regarding its capital structure?
You own a stock that you are considering selling. The current dividend is $1.10/share. Your required return for this stock is 7%. The current market price of the stock is $23.50. Consider each of the following situations separately. If the dividend i..
QWERTY Logistics announced that they will pay a dividend of $10. Their stock is currently trading at a price of $110. There are no taxes and capital markets are perfect. Hans-Eberhard prefers a $20 dividend. He currently owns 100 shares. What should ..
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer, purchased just 2 years ago, is being depreciated on a straight-line basis and has 6 years of remaining life. Gilbert's ..
Hot and Cold has annual sales of $982,000, annual depreciation of $127,000, and net working capital of $243,000. The tax rate is 34 percent and the profit margin is 6 percent. The firm has no interest expense. What is the amount of the operating cash..
a. A firm has fixed cost of $100,000. It charges a price of $25 per unit, has variable cost per unit of $15, and seeks to make $50,000 in profit. What output must the firm produce and sell to achieve this profit? 150,000/10 = 15,000 units output b. B..
Suppose that an investor is planning to purchase a 9% coupon bond selling at par with 4 years to maturity and plans to hold it for 4 years. The investor expects that he can reinvest the coupon payments at an annual interest rate of 8.4%. What is the ..
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