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Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 7.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 6.0 percent, how much will Nanotech pay to buy back its current outstanding bonds?
A company compensates executives with 10-year Euaropean call options which is granted at the money. If there is a significant drop in the share price, the company's board will reset the strike price of the options to equal the new share price. Calcul..
A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 13 percent. The value of the preferred stock is ________.
Sun Investment Inc. current stock price is $450 and its last dividend was $8.00. In view of Sun’s strong financial position and its consequent low risk, its required rate of return is 6%. If dividends are expected to grow at a constant rate, g, in th..
Two inventive entrepreneurs have interested a group of venture capitalists in backing a new business project. The proposed plan would consist of a series of international retail outlets to distribute and service a full line of ingenious home garden t..
ABC Waterhouse's free cash flow next year will be $250 million and it is widely expected to grow at a 5 percent annual rate indefinitely. The company's weighted average cost of capital is 11 percent, the market value of its liabilities is $2.5 billio..
Two sports apparel stores in Gainesville have the following: Store 1 has current assets of $800,000, current liabilities of $1 million and no inventory. Store 2 has current assets $1.2 million, current liabilities of $900,000 and an inventory worth $..
Suppose your company needs to raise $10 million to construct a new office building at an expanded manufacturing site. As CFO, you plan to raise the money by selling 30-year $1,000 par value bonds with a coupon rate of 6% which is the Yield in Maturit..
Consider Company X with an estimated 20% growth rate in earnings, a P/E multiple of 40, projected earnings at the end of this year of $2.50/share and projected dividends of $1/sh. What would be the projected share price for Company X at the end of th..
Farris Industrial purchased a machine five years ago at a cost of $164,900. The machine is being depreciated using the straight-line method over eight years. The tax rate is 35 percent and the discount rate is 14 percent. If the machine is sold today..
Mrs. Jackson sells shoes part-time for Hall Shoes. Hall pays Mrs. Jackson 16.25 dollars per hour plus a 4 percent commission on all sales. Assume Mrs. Jackson works 28 hours and has 8,700 dollars sales. What is Mrs. Jackson’s gross pay?
Mercy Me’s hospital (a tax exempt not-for-profit) has a target capital structure of 40% debt and 60% equity. At this capital structure, its cost of equity is 5% and its cost of Debt is 9%. What is its overall cost of capital?
Mullineaux Corp. has a target capital structure of 70% common stock, 5% preferred stock, and 25% debt. Its cost of equity is 11%, the cost of prefered stock is 5%, and the pretax cost of debt is 7%. The relevant tax rate is 35%. What is the mullineux..
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