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A company's book value of equity is $200 million, and its book value cost of equity is 24%. It has 2 million shares outstanding with a price per share of $125. Its beta is 1.35. The risk free rate is 2.50% and the return on the market is 18.25%. The company also has two bonds. The book value of bond 1 is $65 million and its coupon rate is 10%. The book value of bond 2 is $35 million and its coupon rate is 12%. The current yield to maturity for bond 1 is 9% and the current yield to maturity for bond 2 is 13%. Bond 1's price is $1,025 and bond 2's price is $960. The company's tax rate is 35%.
Calculate the company's market value debt to equity ratio.
Blue Demon Bank expects that the Mexican peso will appreciate against the dollar from its spot rate of $.14 to $.15 in 10 days. The following interbank lending and borrowing rates exist: How could Blue Demon Bank attempt to capitalize on its expectat..
A firm evaluates all of its projects by applying the IRR rule.
Consider an investment with the following returns:- What is the time-weighted annual return for this investment for the four-year period?
Company A is evaluating a project that will increase sales by $50,000 and costs by $3,000 per year. The project will initially cost $70,000 for fixed assets that will be depreciated straight-line to a zero book value over the 5-year life of the proje..
Asian Trading Company paid a dividend yesterday of $4 per share. The dividend is expected to grow at a constant rate of 7% per year. The price of Asian Trading Company's stock today is $25 per share. If Asian Trading Company decides to issue new comm..
Firm A has EBIT of $400,000, Earnings before Taxes of $280,000, and Earnings after Taxes of $168,000. What is the AFTER-TAX cost of the Firm's interest expense?
You are considering a an investment in a project with a life of eight years, an initial outlay of $120,000, and annual after-tax cash flow of $52,000. The project also requires an increase in inventories of $22,000. Calculate the payback period for t..
What is the payback period for this project? Their acceptance period is five years.
You are planning your retirement in 10 years. You currently have $161,000 in a bond account and $601,000 in a stock account. You plan to add $7,900 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..
how much of the payment will go toward the principal of the loan and how much will go toward interest?
The current price of a non-dividend paying stock is $30. Use a two-step tree to value an American put option on the stock with a strike price of $32 that expires in 3 months. Each step is 1.5 months, the risk free rate is 8% per annum with continuous..
You are scheduled to receive a $480 cash flow in one year, a $780 cash flow in two years, and pay a $380 payment in three years. If interest rates are 9 percent per year, what is the combined present value of these cash flows?
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