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1. Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 13.30%. What is Percy's cost of common equity? Round your answer to two decimal places.
2. A firm has a dividend yield of 9%. What is the expected return, if a firm has a 45% payout ratio, a return on equity of 10%, and assuming dividends grow at a constant rate?
3. Samuel Smith invested in gold U.S. coins ten years ago, paying $316.53 for one-ounce gold "double eagle" coins. He could sell these coins for $935.03 today. What was his annual rate of return for this investment? (PLEASE SHOW YOUR WORK).
Randall, inc. is planning to issue bonds that will have mature in 25 years. At what price should the bonds sell?
Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for $10,348. Calculate accumulated depreciation over 4 years.
Jetson Foundry is thinking about purchasing new sand-casting equipment that would reduce the time and cost of grinding customer orders to tolerance. The new equipment will cost $70,000 and it will take $15,000 to modify it for company needs. Evaluate..
A stock has had returns of 24 percent, 13 percent, 3 percent, -17 percent, What are the arithmetic and geometric returns for the stock?
Suppose that a firm's recent earnings per share and dividend per share are $3.15 and $2.60, respectively. Both are expected to grow at 6 percent. However, the firm's current P/E ration of 27 seems high for this growth rate. The P/E ratio is expected ..
What is the relationship between discounting and compounding? What is the relationship between the present-value factor and the annuity present-value factor? What is an annuity due? How does this differ from an ordinary annuity? What is the present v..
The firms of the economy produce $100,000 per year in pre-tax and interest cash flows in perpetuity. This production is riskless. The corporate tax rate is 30%. Verbally characterize the optimal (tax minimizing) capital structure for the economy (i.e..
Dupuis can borrow at 9.50 percent. Dupuis currently has no debt, and the cost of equity is 15 percent. The current value of the firm is $646,000. The corporate tax rate is 30 percent. What will the value be if Dupuis borrows $217,000 and uses the pro..
How much will you have in this account at the end of 28 years? Assume that all interest received at the end of the period is reinvested the next period.
Jim and Alice Lange employess at Walmart have put themselves on a strict budget. There goal at the years end is to buy a boat for $20,000 in cash. Their budget includes the following 41% food and lodging 14% entertainment 10% educational Jim earns $2..
Suppose your company needs $10 million to build a new assembly line. Your target debt−equity ratio is .4. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 7 percent. What is your company's weighted average flot..
A 5-year bond with a 4.45% coupon sells for $107.48. A 7-year bond with a 5.75% coupon sells for 116.564. The conversion factor for the 5-year bond is 0.933891 while the 7-year bond is 0.98588. Assume that the yields for both bonds are 6% and that co..
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