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Suppose you are collecting information about these two firms: Jackson Corporation and Allied Industries, and would like to know which firm has higher stock’s expected return to compare with its required return. Each of them is expected to pay the same $1.5 million dollar dividend every year in perpetuity. Jackson Corporation is riskier and has an equity cost of capital of 15%. Allied Industries is not as shaky as Jackson, so Allied has an equity cost of capital of only 10%. Assume that the market portfolio is not efficient. Both stocks have the same beta and an expected return of 12%. Please Show your work
Earnhardt Driving School’s 2010 balance sheet showed net fixed assets of $4.7 million, and the 2011 balance sheet showed net fixed assets of $5.3 million. The company’s 2011 income statement showed a depreciation expense of $405,000. What was net cap..
Ashes Divide Corporation has bonds on the market with 19 years to maturity, a YTM of 6.4 percent, and a current price of $1,206.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Break-even EBIT (with and without taxes). Alpha company is looking at two different capital structures, one an all-equity firm and other a levered firm with $2.52 million of debt financing at 7% interest. The all-equity firm will have a value of $8.4..
(Cost of preferred stock) Your firm is planning to issue preferred stock. The stock is expected to sell for $98.64 a share and will have a $100 par value on which the firm will pay a 13.6 percent dividend. What is the cost of capital to the firm for ..
If the firm makes it's debentures subordinate to it's bank debt, what will the effect be on the average cost of total debt. What effect does this have on the interest rate that a firm must pay on a new issue of long-term debt. Why does it have such a..
How much will we need in foundation grants this year to make the purchase break-even financially?- Are the payments from the county sufficient?
Regular Payback Blanchford Enterprises is considering a project that has the following cash flow data. Year 0 1 2 3 Cash flows: -$1,039 $318 $388 $586 Calculate the project's regular payback. Follow the guidelines used in this course for precision of..
A stock is trading at $55 per share. The stock is expected to have a year-end dividend of $2 per share and expected to grow at same constant rate g throughout time. The stocks required rate of return is 16 %( assume the market is in equilibrium with ..
Farrah owns 5,000 shares of stock in DAS, Inc. with a market value of $15,000.DAS declares a 20% stock dividend. After the dividend is paid, Farrah owns. In industries with volatile earnings, the residual dividend policy results in the most consisten..
Technologist cost per test Variable cost per test The Center has 1 machine and 1 technologist $ 48 $ 27 As administrative director of the Laboratory you have been asked to see if it is feasible to add more staff to support Laboratory services. Calcul..
Suppose that Dunn Industries has annual sales of $4.05 million, cost of goods sold of $1,560,000, average inventories of $1,026,000, and average accounts receivable of $660,000. Assume that all of Dunn’s sales are on credit. What will be the firm’s o..
Debt-to-Equity Ratio Will Able Corporation's balance sheet showed the following amounts: Current Liabilities, $24,505; Bonds Payable, $18,000; Lease Obligations, $24,183; and Notes Payable, $6,595. Total stockholders' equity was $36,100. Required: Wh..
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