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Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. As a result of current interest rates, the bonds can be sold for $1,010 each; flotation costs of $30 per bond will be incurred in this process. The firm is in the 40% tax bracket.
a. Find the net proceeds from sale of the bond, Nd.
b. Show the cash flows from the firm's point of view over the maturity of the bond.
c. Calculate the before-tax and after-tax costs of debt.
d. Use the approximation formula to estimate the before-tax and after-tax costs of debt.
e. Compare and contrast the costs of debt calculated in parts c and d. Which approach do you prefer? Why?
when we observe the capital structure of many firms we find that they tend to utilize lower levels of debt than that
Objective type questions on bond valuation and Which of the following would be most likely to increase the coupon rate that is required to enable a bond to be issued at par
Nast Store has derived the following customer credit scoring model after years of information collecting and model testing:
1.If you own 300 shares of Alaska Air at $42.88, 350 shares of Best Buy at $51.32, and 250 shares of Ford Motor at $8.51, what are the portfolio weights of each stock? Round your answers to 3 decimals places.
CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Stock is 20.38 percent, the Risk-Free Rate is 9.0 percent, and the Beta for Stock i is 1.75. Find the Expected Return on the market u..
Assuming you are in a 28% tax bracket, what amount you have lower your federal income tax?
a. Calculate the variance of portfolio returns, assuming the correlation between the returns is 1.0. b. Calculate the variance of portfolio returns, assuming the correlation is 0.7.
What is the amount of the deductible IRA contribution that John and Mary can make for 2013 assuming that both earn more than $7,000?
An investor bought stock at $50 and sold a covered call with a 55 strike price for $2. The stock now sells for $60. Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.
Thress Industries just paid a divident of $1.50 a share (ie. D = $1.50). The divident is expected to grow 5% a year for the next 3 years, and then 10% a year thereafter. what is the expected divident per share for each of the next 5 years?
In dollars, sales were $698,266. What was the net loss in dollars? (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)
a. evaluate the required return for an asset with a beta of .90 when the risk-free rate and market return are 6 and 10
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