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Sao Paulo Inc. needs $40 million in new capital, which it may acquire by selling bonds at par with coupon 10% or by selling stock at $37 (net) per share. The current capital structure of Sao Paulo consists of $250 million (face value) of 8% coupon bonds selling at 95, and 11 million shares of stock selling at $40 apiece. After the new financing, the EBIT of São Paulo is expected to be $55 million with a standard deviation of $25 million. Which method of financing do you recommend? What is the probability that you are right? Show solutions.
ABC’s next dividend is expected to be $3.25, its required return is 21%, its growth rate is 6%. What is ABC's expected stock price in 16 years?
1. you have invested 500 shares in maxwells company limited. for the next three years you will receive dividends of
If the nominal interest rate is 8% and the risk-free rate is 3%, the expected inflation rate must be
One year ago, the Chinese e-commerce company Alibaba Group floated its shares in the biggest Initial Public Offering in US history. Alibaba Group priced its shares at $68 raising $21.8 bn and valuing the company at $167.6 bn. What is the payout ratio..
Pace Corporation had a taxable income of $300,000 in 2007. Which of the following expression may be used to compute the federal income tax liability for the company?
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth rate falling off to a constant 7.8 percent thereafter. Required: If the required return is 15 percent and the company just..
Which of the following levels of government and/or organizations build and manage prisons?
The discounted payback period for the cash flow in question 6.15 is:
Calculate the price (per $100 par value), to three decimal places, of a three-year fixed-coupon bond paying a coupon rate of 9% pa if the bond pays coupons every half year. Assume that the bond is default-free and that a coupon has just been paid -- ..
Alaska Power Company issued $1,000 bonds that have an annual coupon rate of 6.5%. The present market value of the bonds is $1,225. If the bonds have 17 years remaining until maturity, what is the current yield on Alaska Power Company bonds?
Which of the following is NOT associated with (or does not contribute to) business risk? Recall that business risk is affected by a firm's operations.
EMC Corporation has never paid a dividend. Its current free cash flow of $430,000 is expected to grow at a constant rate of 5.5%. The weighted average cost of capital is WACC = 13.75%. Calculate EMC's estimated value of operations. Round your answer ..
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