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You own some shares of Microsoft worth $1,000. Beta of Microsoft is 2. Microsoft currently has no debt. Microsoft decides to issue debt and buy back some of its stock in open market. Specifically, Microsoft decides to buy back 20% of its stock using ALL the proceeds of a new issue of risk-free bonds. Corporate tax rate is zero. You decide to not sell any part of your shares.
a) What is the value of your shares after the buyback is completed.
Determine the firm's free cash flow and calculate the liquidity, activity, debt, profitability, and market ratios for Jaedan industries.
What is the standard deviation of a two-asset portfolio comprised of Stock A and Stock B if both Stock A and Stock B have a variance of 0.2209, the correlation coefficient between the two stocks is -0.17, and Stock A makes up 24% of the portfolio?
Calculate and interpret the ratios - Industry Average Return on assets (ROA) 5.2% Current ratio 2.0 Days cash on hand 22 daysAverage collection
The proposition that a firm borrows up to the point where the marginal benefit of the interest tax shield derived from increased debt is just equal to the marginal expense of the resulting increase in financial distress costs is called:
Theo is a consultant who earns 72,000$ annually. His wife, Julia is a homemaker and theey have one child, Ben. Theo is covered by 200,000$ life insurance policy. The couple assumes an annual inflation rate of 3%. How would you design a finance plan f..
Ethier Enterprise has an unlevered beta of 1.15. Ethier is financed with 40% debt and has a levered beta of 1.65. If the risk free rate is 6.5% and the market risk premium is 5%, how much is the additional premium that Ethier's shareholders require t..
Exodus Limousine Company has $1,000 par value bonds outstanding at 13 percent interest. The bonds will mature in 50 years. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calcula..
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 5 % 20 % B 8 % 80 % Correlation = –1. C..
Many regulators would like to see bank capital requirements raised. Consider a proposal to increase the minimum Tier 1 and total capital ratios to 9 percent and 12 percent, respectively. What impact would this have on bank risk? Would small banks and..
Using the financial statements and other information that you have for MPR, and assuming a 5% perpetual growth rate in the FCFE, value the equity using the FCFE method.
A treasury bill with 64 days to maturity is quoted at 99.012. what is the bank discount yield, the bond equivalent yield and the effective annual return?
Call Premium A 5.75 percent corporate coupon bond is callable in ten years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
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