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Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent.
a. What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Pretax cost of debt % =?
b. What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Aftertax cost of debt % =?
c. Which is more relevant, the pretax or the aftertax cost of debt?
(X)Aftertax cost of debt
( )Pretax cost of debt.
Compute the IRR for Project F. The appropriate cost of capital is 11 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project F Time: 0 1 2 3 4 Cash flow –$10,400 $4,000 $4,830 $2,170 $2,800 IRR % Sho..
Suppose a firm finds itself as the target of a possible hostile takeover. An outsider investor has acquired a major stake of shares and is threatening to exert influence on the board.
Describe the dividend theories: dividend irrelevance, dividend preference, tax effect theory, clientele effect, and signaling hypothesis. Please choose one of these concepts and discuss it in a minimum of three sentences.
Stock Index Performance On November 27, 2007, The Dow Jones Industrial Average closed at 13,038.44, which was up 255.04 that day. What was the return (in percent) of the stock market that day?
Staind, Inc., has 6 percent coupon bonds on the market that have 13 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 11 percent, what is the current bond price?
MMK normally pays an annual dividend. The last such dividend paid was $2.85, all future dividends are expected to grow at a rate of 8% per year, and the firm faces a required rate of return on equity of 13%. If the firm just announced that the next d..
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1.8 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of five y..
You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three-year life, and has pretax operating costs of $62,000 per year. The Techron II costs $415,000, has a five-year life, and has pretax operating co..
Just need number 2 please consider a call option for an asset with the following parameters: What is the formula for the delta of the option as a function of (U,D,R,Vu,Vd)? Determine the terminal distribution of the asset price?
Macintosh computers can purchase a piece of equipment that is suspected to yield an 11% return in 10 be financed at 6% with debt. Later in the year the Company said no to the opportunity to purchase a newer machines that would yield a 9% return or co..
Effects of real interest rates. What is the expected relationship between the relative real interest rates of two countries and the exchange rate of their currencies?
A corporate bond is quoted at a price of 110.5 (% of face value) and carries a 6.0 percent coupon. The bond pays interest semi annually. What is the current yield on one of these bonds?
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