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XYZ company has no debt and the cost of equity is 15%. The current value of the firm is $1,000,000 and XYZ can borrow 10%. Assume XYZ pays no tax.
1. Compute the firm value if XYZ borrows $200,000 and uses the proceeds to repurchase shares.
2. Calculate firm's new cost of equity
3. Calculate the new WACC.
Kaufman Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 12% annual coupon payment, and their current price is $1,180. The bonds may be called in 5 years at 109% of face value (Call price = $1,..
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The TMM Corporation has just announced a rights offering where it will take four rights to buy an additional share of common stock at $50 a share. If the current market price is $60 a share, what would be the theoretical market price per share once t..
Which of the following is a payment liability?
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Find the break point in the Marginal Cost of Capital and determine the cost of each capital structure component.
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