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Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, a coupon rate of 10 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon rate of 11 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 years. Suppose the most recent dividend was $5.90 and the dividend growth rate is 7 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
Speculate how commercial banks will perform overall throughout the next three years as the economy rebounds. Then determine the economic consequences for this performance.
Margaret Willis is the owner of Willis Concrete Company. Her company supplies poured concrete to residential and commercial construction sites throughout the San Diego area. That is the reason that her contracts with all vendors included clauses that..
The stock valuation methods zero-growth, constant growth, variable growth, free cash flow, P/E multiple models, and book value method, to find out which is most accurate in regard to value to firms we would have to analyze each one individually.
The impact of major eents from the recent financial crisis on credit default swaps
Do you think the rate of return on Ed's investment will be higher than, lower than, or the same as the rate of return on Maria's investment? Explain.
Suppose that there are no storage costs for crude oil and the interest rate for borrowing or lending is 5% per annum. How could you make money on May 26, 2010, by trading July 2010 and December 2010 contracts? Use Table 2.2.
A bond currently sells for $1,050, which gives it a yield to maturity of 6%. Suppose that if the yield increases by 25 basis points, the price of the bond falls to $1,025. What is the duration of this bond?
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other ..
Which firm's shareholders are wealthier? Explain why. The following are selected financial information on Firm A and Firm B. You are asked to complete the table by methodically calculating the missing information. You will assume that Cost of Goods S..
You are considering an investment in a U.S. corporate bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%; inflation is expected to be 2.0%; the maturity risk premium is 1.5%; and, th..
Pete Morton is planning to go to graduate school in a program of study that will take 2 years. Pete wants to have $19000available each year for various school and living expenses. If he earns 7 percent on his money, how much must be deposit at the st..
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 14 percent and 17 percent, respectively. The standard deviations of the assets are 40 percent and 48 percent, respectively.
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