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1. Gilbert & Sons is a levered firm. It has 300,000 shares of stock outstanding with a market price of $32 per share. The company also has $6.6 million of debt outstanding that sells at par. The pre-tax cost of debt is 9 percent and the unlevered cost of capital is 12 percent. What is the cost of equity if the tax rate is 35 percent?
A) 12.00 percent B) 12.79 percent C) 13.34 percent D) 14.84 percent
2. Bond portfolio immunization techniques balance _______ and ______ risk.
Price, reinvestment
Price, liquidity
Credit, reinvestment
Credit, liquidity
Hand-to-Mouth (H2M) is currently cash-constrained, and must make decision about whether to delay paying one of its suppliers or take out a loan.
You have been managing a $5 million portfolio that has a beta of 1.00 and a required rate of return of 12%. The current risk-free rate is 5.00%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.70, what wi..
You believe that in one year, the yield to maturity will be 8.6 percent. What is the change in price the bond will experience in dollars?
What is the cost of capital to be used as a discount rate in company and project valuations?
A stock is currently priced at $43. The stock will either increase or decrease by 20 percent over the next year. There is a call option on the stock with a strike price of $40 and one year until expiration. If the risk-free rate is 2 percent, what is..
On June 25, 2012, the spot offer price of Google stock is $561.51 and the offer price of a call option with a strike price of $560 and a maturity date of September is $30.70. A trader is considering two alternatives: buy 100 shares of the stock and b..
You have information about firm: total asset = $500,000; common stock equity = $150,000; ROE = 12%. What are firm’s earnings available to common stock holders
ABC Company has annual sales of $400,000 and cost of goods sold of $159,505. What is the average accounts payable balance?
For accounting, it will be depreciated straight-line to zero over the 3-year project life. At the end of the project, the fixed asset will be worthless.
Use the? Black-Scholes formula to determine the price of a? six-month European call option on the British pound with a strike price of $1.80/£.
Lei Materials' balance sheet lists total assets of $1.16 billion, $132 million in current liabilities, $415 million in long-term debt, $613 million in common equity, and 58 million shares of common stock. If Lei's current stock price is $52.08, what ..
The project requires an initial investment in net working capital of $260,000, & the fixed asset will have a market value of $280,000 at the end of the project.
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