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Best Dairy (“BD”), Inc.is constructing its cost of capital. Its target capital structure is 30 percent debt and 70 percent common equity. It can raise up to $15.0 million in bank loans at a before tax cost of 10% but any debt beyond $15.0 million will have a higher cost at 13% before tax. BD is a constant growth firm that just paid a common stock dividend of $3.40, the common stock currently sells for $50.00 per share and has a constant growth rate of 6 percent. The firm's available retained earnings are expected to be $9 million. Flotation costs on new common stock total $3.00 per share. The new shares of common stock will have to be underpriced by $2.50 per share to sell. The firm's marginal tax rate is 40 percent. a. Calculate the after tax cost for each of the capital components. b. Calculate all Breakpoints. c. Draw the graph, label all elements (i.e., label each tier, the breakpoints, etc.) d. Calculate the weighted cost of capital for each tier of financing.
Momsen Corp. is experiencing rapid growth. What is the projected dividend for the coming year?
Making decisions in business can be difficult. Fortunately we have a lot of great tools to help us! Choose two decision-making tools and explain how you would use them to make a decision with an actual problem you have faced in your professional life..
Twenty year self liquidating mortgage with five years remaining on the term. Interest rate is 8% and current five year treasury is 1.59%. What is the yield maintenance penalty? What if there were 10 years remaining and the treasury was 2.75%. What if..
Use the CAPM formula to get an answer for how much the return on the individual security will be.
We know the following about Carl & Co. Total assets are $200m, D is $60m, E is $130m, cash is $50m and the # of shares is 1m. We estimate that the market value of equity is 3 times the book value of it. Finally, a fire sale of the firm would bring 40..
What is the standard deviation of returns on a well-diversified portfolio with a beta of 1.3?
What is the annual after-tax cost to her current employer to provide Seiko with the $14,200 increase in salary?
Compute the total current value of the company Amazon and its implied stock value.
Currency hedging Exercise: A German company expects to pay 5 million Australian Dollars (AUD) in 3 months.
Weston Industries has a debt–equity ratio of 1.1. Its WACC is 9.6 percent, and its cost of debt is 7.2 percent. The corporate tax rate is 35 percent. What is Weston’s cost of equity capital? What is Weston’s unlevered cost of equity capital.
Calculate the? firm's operating cycle and cash conversion cycle. What is the dollar value of inventory held by the? firm?
What are the main financial reporting issues associated with the consolidation of accounts for groups of companies in relation to an acquisition?
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