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Eccles Company has beta 1.7, debt/assets ratio 20%, and tax rate 34%. The cost of debt for Eccles is 9%, and of equity 15%. The riskless rate is 4%. Find the WACC of Eccles. If its debt/assets ratio is increased to 25% while its cost of debt remains unchanged, what is the new WACC? Which leverage ratio is better?
App Store Co. issued 16-year bonds one year ago at a coupon rate of 7.7 percent. The bonds make semi-annual payments. If the YTM on these bonds is 5.4 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer..
Calculating Returns [LO1] Suppose you bought a bond with an annual coupon of 7 percent one year ago for $970. The bond sells for $940 today. What was your total nominal rate of return on this investment over the past year?
The Thakor Corporation’s purchases from suppliers in a quarter are equal to 70 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 30 percent of sales, and interest and dividends are $80 ..
In the percent of sales method:
Compute the required rate of return for the stock of Howard Joel Wolowitz, Inc., if the risk-free rate is 6%, the expected market return is 12%, and Howard Joel Wolowitz's stock has a beta of 0.8.
Mullet Technology is planning an IPO. The company and its underwriter agree that the current value of equity of Mullet is $80 million. Mullet currently has 5 million shares outstanding and will issue 2 million new shares. The underwriter charges a 7%..
The Jones’ want to save for their child’s education. They have four options: (1) Establish a 529 plan; (2) Establish a custodian Roth IRA; (3) Establish a Coverdale Education IRA; (4) Establish a “regular” non-tax deferred account. State which on..
If you put up $48,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be?
Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $820,322, $863,275, $937,250, $1,018,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..
If income taxes were substantially increased to cover the costs of a new national health care program, the interest rate spread between tax-exempt municipal bonds and corporate bonds would ____.
A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of $23,000, and an annual OCF of −$22,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Calculate the value of a BWS call option if its exercise price is $40 and it expires today. What can you say about the value of a BWS call option if its exercise price is $40 and it expires in six months?
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