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Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year's dividend is $2.50 per share that is growing by 4% per year.
Calculate the company's weighted average cost of capital. Use the dividend discount model. Show calculations step by step.
The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC. Explain and defend why you agree or disagree. Report how would you advise the CEO.
Given the following information, what is the degree of operating leverage? Price = $20 per unit; variable cost = $6 per unit; fixed costs = $5,000 per year; depreciation = $8,000 per year; sales = 2,000 units per year. Tax rate = 34%.
Quarles Industries had the following operating results for 2015: sales = $27,960; cost of goods sold = $19,360; depreciation expense = $4,940; interest expense = $2,190; dividends paid = $1,050. What is net income for 2015? What is the operating cash..
Prepare an operating budget for the next four quarters of operation for the director and summarize it (provide totals) for the full year.
How many of the following balance sheet items are classified as a current asset or current liability?
A stock with a beta of 1.4 will pay a dividend of $2 next year that is expected to grow at 7%. If the risk-free rate is 2% and the market risk premium is 5.5%, what is the most you would be willing to pay for the stock today?
Research and development equipment is being purchased for asphalt testing. calculate the after-tax Present Worth of the asset.
Consider an after tax MARR of 10%. Compute the NPV of the annual tax savings.
Mike wants to buy a new car and pay it off in a decent amount of time. He is willing to initially put a down payment of $10,000 today. The car salesman says that he can give Mike a loan for the rest of the car for $250 a month for the first 6 months ..
What will be the securitys current price if its expected future payoff remains the same but the covariance of its rate of return with the market portfolio doubles?
Suppose the dividends for the Seger Corporation over the past six years were $2.52, $2.60, $2.69, $2.77, $2.87, and $2.92, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
A firm manufactures and sells high quality printers and toners. Each printer sells for $790 and each toner for $70. The average user keeps the printer for 5 years and consumes 4 toners every year. Using rate of return analysis to determine if a user ..
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