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The Color Spectrum uses a combination of common stock and debt financing. It also wants to structure the firm in a manner that will produce a weighted average cost of capital of 8 percent. The pretax cost of debt is 6.7 percent and the cost of common stock is 10.4 percent. What percentage of the firm's capital funding should be debt financing if its tax rate is 30 percent? (Hint: Find the weight of debt in the formula for WACC. Remember that sum of weights of debt and equity must equal 1.)
a. 38.6%b. 38.8%c. 39.2%d. 39.3%e. 39.8%
Suppose a stock had an initial price of $88 per share, paid a dividend of $2.10 per share during the year, and had an ending share price of $77.
Lee Financial Services pays employees monthly. Payroll information is given below for January 2011, 1st month of Lee's fiscal year. Suppose that none of employees exceeded any relevant wage base.
Apex Inc., is a biotechnology company that is about to announce the results of its clinical trials of a potential new cancer drug. If the trials were successful, apnex stock will be worth $70 each share.
Stoner Company granted stock options to key employees for the purchase of 60,000 shares of the firm's common stock at $25 per share.
Assume you buy an 8% coupon, 20 year bond today when it is first issued. If interest rates suddenly rise to 12%, what happens to the value of your bond? (coupon payments are semi-annually).
Determine the correct statement regarding profit sharing plan.
Explain why do corporations buy back their own stock? What does it tell you about the corporation? What effect does the purchase have on the price of a company's stock?
Assess the likely impact of the rupiah's depreciation on Bakrie's three different businesses. Which of Bakrie's businesses will be most hurt by the rupiah's fall? Will any of these businesses actually benefit from rupiah depreciation?
How ratio analysis provides a meaningful comparison of a company to its industry, chief competitors, or to any other well run firm?
Make a usable spreadsheet that can compute the blended interest rate for two separate loans. Below is an example of the output information that this spreadsheet would produce for this particular scenario:
Five investment options have the following returns and standard deviations of returns. Use the coefficient of variation and rank the five options from lowest risk to highest risk.
Suppose that one-year zero-coupon US Treasury bonds with a $10,000 face value are currently selling for $9,852.
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