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A company expects to earn $23 million in income this coming year. Its target capital structure is 30% debt, 15% preferred stock, and 55% common equity financing. The company normally pays a dividend equal to 27% of its earnings. At what point will its WACC move from one level to the next, based upon the need to issue new common shares, assuming it adheres to its target capital structure? At what total capital investment level? Show your answer in millions of dollars with one decimal point ($34,000,000 you would record as 34.0)
A retailer of winter coats prices each at $500 at the beginning of the selling season and after three months reduces the price of any unsold coats to $350. Using a simple demand function, show how charging two prices can dramatically increase profits..
Your grandparents have a small pension and social security. They have $300,000 in a savings account earning 1%. A person at their church said that if they invest $200,000 in this real estate deal they could earn 12% a year and it is safe because it i..
An analyst has modeled XYZ stock using the Fama & French three factor model (FF3FM). Over the past few years the risk premium on SMB was 2.25% and the risk premium on HML was 2.95%. Regression analysis shows that XYZ’s beta coefficient on SMB is 2.5 ..
Use the information below to determine before tax-costs of debt financing of bond S:
incremental cash flowsnbsp1. it is 1995 and food for less ffl a grocery store is considering offering one hour photo
After watching the prices of drug stocks move up and down by large amounts, you seek an investment strategy that will succeed in spite of these unpredictable fluctuations. You notice that Merck stock is trading at 36.875. What option strategy could y..
Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $50,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 9%, and the loa..
A portfolio has an expected return of 10 percent and a standard deviation of 3 percent. What is the worst return you would expect to see with 95 percent confidence?
You are short 27 gasoline futures contracts, established at an initial settle price of $2.505 per gallon, where each contract represents 42,000 gallons. Compute the balance in your margin account at the end of each of the four trading days, and compu..
An investor wants to form a two asset portfolio consisting of treasury bills with a return of 2.5% and a risky portfolio with an expected return of 15.2% and a standard deviation of 16%. The investor wants the expected return of the two asset portfol..
My cousin Robert wishes to have $10,000 per year as a retirement supplement for 20 years (from age 65-85). He is now 40 years old. How much must he save each year for the next 25 years if he assumes that his savings will earn 12% annually?
Two companies manufacture can openers. Relevant data follows: Old School Hi Tech Manufacturing, Inc. Manufacturing, Inc. Degree of Operating Leverage 2.2 5.7 Degree of Financial Leverage 1.5 3.3 Which of these companies is more at risk? Why? Discuss ..
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