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Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.1%. The bond is currently selling for a price of $1,120 and will mature in 10 years. The firm's tax rate is 34%. b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? c. A new common stock issue that paid a $1.71 dividend last year. THe par value of the stock is $14, and the firm's dividends per share have grown at a rate of 7.6% per year. This growth rate is expected to continue into the foreseable future. THe price of this stock is now $27.38. d. A preferred stock paying a 9.2% dividend on a $126 par value. The preferred shares are currently selling for $145.54. e. A bond selling to yield 12.9% for the purchaser of the bond. The borrowing firm faces a tax rate of 34%.
Felton Farm Supplies, Inc. has an ROA (return on assets) of 12 percent, total assets of $300,000 and a net profit margin of 4.5 percent. What are Felton Farm Supplies annual sales?
Using the data in the question for Milwaukee Surgical Supplies, what if the company adjusts by three percentage points for both low and high risk projects and the projects are classified as follows, Project A has high risk, Project B has high risk, P..
Phillip's Manufacturing wants to raise $15 million to open a new production center. The company estimates the issue costs including the legal and accounting fees will be $530,000. The underwriters have set the stock price at $23 a share and the under..
All city Inc. is financed 40% with debt, 10% with proffered stock, and 50% with common stock. its pretax cost of debt is 6%, its proffered stock pays an annual dividend of $2.50 and is priced at $30. it has an equity beta of 1.1. Assume the risk free..
A research division of a large consumer electronics company has developed a new type of mp3 player. The production costs in the current period will be $1,399,100. The new product will produce a cash flow of $500,000 a year for 4 consecutive years beg..
A video rental store will cost $650,000 to open. Assuming annual sales of $1 million, variable costs of 35%, fixed costs of $300,000, depreciation of $100,000, and a tax rate of 35%, calculate the NPV of the project over a 10-year horizon (no inflati..
In 2013 Caterpillar Inc. had about 654 million shares outstanding. Their book value was $33 per share, and the market price was $86.50 per share. The company’s balance sheet shows that the company had $19.7 billion of long-term debt, which was curren..
Choose a future investment that you would like to make, such as a car or home. State the amount you assume you currently have on hand and the amount of the purchase or down payment. Then determine how much you must save each month before you to make ..
The financial advisors of RBM suggests that the cost of funds to evaluate the proposals is eight per cent. Analyse the two payment possibilities and determine which one you would accept as a manager of RBM.
Honda is considering increasing production after unexpected strong demand for its new motorbike. To evaluate the proposal, the company needs to calculate its cost of capital. You've collected the following information: The company wants to maintain i..
You are planning to make annual deposits of $6,330 into a retirement account that pays 10 percent interest compounded monthly. How large will your account balance be in 28 years?
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Would this be a one-time cash flow or a recurring one, assuming the company ceases..
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