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Cost of Capital. The Conner Company has the following capital structure:
Mortgage bonds, 6%
$ 20,000,000
Common stock (1 million shares)
25,000,000
Retained earnings
55,000,000
$100,000,000
Mortgage bonds of similar quality could be sold at a net of 95 to yield 6½ percent. Their common stock has been selling for $100 per share. The company has paid 50 percent of earnings in dividends for several years and intends to continue the policy. The current dividend is $4 per share. Earnings are growing at 5 percent per year. If the company sold a new equity issue, it would expect to net $94 per share after all costs. Their marginal tax rate is 50 percent. Conner wants to determine a cost of capital to use in capital budgeting. Additional projects would be financed to maintain the same relationship between debt and equity. Additional debt would consist of mortgage bonds, and additional equity would consist of retained earnings. (a) Calculate the firm's weighted average cost of capital, and (b) explain why you used the particular weighting system.
bartletts pears has a profit margin of 7.5 percent on sales of 26000000. if the firm has debt of 9500000 and total
Computing expected return and standard deviation of portfolio and What are the weights for investing in the risk-free asset and the S&P that produce a standard deviation for the entire portfolio that is twice the standard deviation of the S&P
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The next dividend payment by Blue Cheese, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. The stock currently sells for $43 per share.
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the risk-free rate of return is 8 the expected rate of return on the market portfolio is 15and the stock of xyrong
Your family recently obtained a 30 months 100,000 fixed rate mortgage. Determine which of the following statements is most correct and why?
finding money to finance your small business can be a real challenge. you might look to the traditional avenues such as
Pit Row Auto, a countrywide auto-parts chain, is planning purchasing a smaller chain, Southern Auto. Pit Row's analyst's project that the merger will result in incremental free cash flows and interest tax savings of $2 million in Year 1st
The firm's corporate cost of capital is 14 percent. project cost irr a $20000 17% b $15000 16% c $12000 15% d $18000 13% a. What is the firm's optimal capital budget?
Assume a corporation has earnings before depreciation and taxes of $82,000, depreciation of $45,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company.
1. if you deposit 15000 today and earn 8 annual interest how much will you have in 9 years?2. tiffany will receive a
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