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Your firm needs to raise $45 million to invest in projects with a positive Net Present Value. You have been asked to recommend one of the following: 1. Common stock which could be sold for $9. 2. Fixed rate bond with a face value of $1000 and a coupon of 7.5% and a warrant attached that allows the owner to buy 90 shares $12 per share. 3. Convertible bond with a coupon of 7.5% which is convertible into 90 shares. You know that additional financing will be needed next year to support positive NPV projects. The industry average debt to total assets ratio is 45%. You believe your optimal capital structure is between 40 and 46% debt. Following are items from the latest financials: Balance Sheet Long-term Debt $40,000,000 Common Stock ($1 par) 55,000,000 Retained earnings 5,000,000 Total $100,000,000 1. Develop the firm’s Balance Sheet for each alternative. Assume that debt has been converted and warrants exercised. 2. What are the advantages and disadvantages of each of these alternatives? 3. Which would you recommend and why?
The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value with a 15-year maturity at a price of $953 that carry a coupon interest rate of 12.1 percent that is paid ..
Voluntary compliance with a tax law means that:
Future value: Larry James is planning to invest $25,000 today in a mutual fund that will provide a return of 0.09 each year. What will be the value of the investment in 10 years? Chuck Brown will receive from his investment cash flows of $3,135, $3,5..
Suppose you put $100 into a savings account today, the account pays 8% compounded semiannually, and you withdraw $50 one year after your initial deposit. What would your ending balance be 20 years after the initial $100 deposit was made, assuming tha..
High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent? A portfolio has a 3-year standard deviation of 18.1..
Describe the critical factor in evaluating whether a performance obligation is satisfied.
Salem Company has the following capital structure: 4.0 million shares of stock, selling at $29 each, with β = 1.3; zero-coupon bonds with face amount $65 million, maturing in 8 years, with yield to maturity 7.0%; and 700,000 shares of preferred stock..
What is Starbucks Strategic Planning and Control? Explain the Forensic Financial Analysis on Starbucks?
Find the duration of a 8.0% coupon bond making semi annually coupon payments if it has 3 years until maturity and has a yield to maturity of 8.0%. What is the duration if the yield to maturity is 10.0%?
The same game costs 1,800 French francs (FF). If purchasing power parity holds, what is the spot exchange rate between the FF and the dollar?
What is the current stock price? What will the price be if the firm has changed to constant dividend policy after 10 years?
hich of the following comes closest to the amount prize (2) needs to pay at the end of year 20 in order that both prizes to have the same present value?
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