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WACC
Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $9 million would have a cost of re = 14%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 9%, and an additional $6 million of debt at rd = 11%. The CFO estimates that a proposed expansion would require an investment of $8.5 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.
Skye is evaluating a proposed investment in a new inventory management system. The system costs $350,000 and will be depreciated using the straight-line method over a five-year expected useful life to a $70,000 salvage value. The new system will allo..
You own a stock that has an expected return of 13.6% and a beta of 1.3. The U.S. Treasury bill is yielding 4.2% and the inflation rate is 3.8%. What is the expected rate of return on the market?
Toy Corp. is analyzing producing and selling a revolutionary simulation computer gaming system. The company estimates its variable cost per unit will be $600 and each system's sales price would be set at 150% of its variable cost per unit.
A project that provides annual cash flows of $1,930 for eight years costs $7,700 today. Is this a good project if the required return is 8 percent? What if it's 24 percent? At what discount rate would you be indifferent between accepting the project ..
Provide a critical analysis of the financial statements and written components of the paper - Discuss and critically analyze whether this is a good expansion. Make recommendations and submit an Executive Summary along with the full report.
Determine the value of the long-term elements of the capital structure, and find out the target percentages for the optimal capital structure. Carry weights to 4 decimal places. Evaluate the retained earnings break point.
compute - the annualized rate of return on this investmentif you had paid cash, and - your rate of return with the margin purchase.
Required rate of return Assume that the risk-free rate is 5.5% and the expected return on the market is 8%. What is the required rate of return on a stock with a beta of 0.7?
On average, it takes two days for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited. What is the amount of the average daily float?
Which of the following ethical strategies can be potentially dangerous for multinational companies in normal business operations? If you were using the 9-Cell industry attractiveness/Business Strength Matrix, what is correct?
National Home Rentals has a beta of 1.24, a stock price of $22, and recently paid an annual dividend of $.94 a share. The dividend growth rate is 4.5 percent. The market has a 10.6 percent rate of return and a risk premium of 7.5 percent. What is the..
Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $3,000,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
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