Assume Reginald Worthington, who pays 40 percent in income taxes, plans to contribute $100,000 to not for profit Ravenswood Community Hospital. Without the contribution, his tax bill would be $500,000. What would his tax bill be if he makes the contr..
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The current stock price is 60.15, the growth rate is 4%, the expected earnings per share e is $5. The company retains 20% of its earnings to fund future growth. There is currently 102.5 million shares outstanding. What is the cost of common equity?
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The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Be..
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Suppose you want to hedge a $370 million bond portfolio with a duration of 7.7 years using 10-year Treasury note futures with a duration of 4.7 years, a futures price of 107, and 99 days to expiration. The multiplier on Treasury note futures is $100,..
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Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 5.80 percent loan with gross proceeds of $5,450,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.10 percent of gross proceeds and w..
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Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..
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Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 15 perce..
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What is a potential concern regarding the royalty income from a retiring musician that may need to be addressed? What investment class (equity, fixed income, real estate etc.) do the royalty payments mimic? Why? Mr. W informs you that at retirement h..
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Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with three years to maturity (TM) has a coupon rate of 5%. The yield of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of t..
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You need to accumulate $10000. To do so you plan to make deposits of $1750 per year, with the first payment being made one year from today, in a bank account that pays 6% interest. Your last deposit will be more than $1750 to reach your $10,000 goal...
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A year ago, you purchased 200 shares of ABC, Inc. for $25.50 on margin. At that time the margin requirement was 40 percent. If the interest rate on the borrowed funds was 9 percent and you sold the stock for $34, what is the percentage return on th..
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A Ford Motor Co. coupon has a coupon rate of 6.75% and pays annual coupons. The next coupon is due tomorrow and the bond matures 32 years from tomorrow. The yield on the bond issue is 6.45%. At what price should this bond trade today, assuming a face..
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