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Question Abco distribution ltd wishes to evaluate an investment in a new era of activity-- manufacturing paint. Bath paints (BP) has been indentified as a company whose sole activity is to produce oaint. The systematic risk of BP's equity is 1.2 . Howecer BP is financed by one part debt to one part equity, whereas Abco Distributors is financed by two parts debt to three parts equity.
Further, Abco's management has estimated the risk-free interest rate to be 12 percent and the expected rate of return on the market portfolio( including the franking premium) to be 17 percent. The company income tax rate is 30 cents in the dollar. The propotion of tax collected from the company that is claimed by shareholders is 0.60, and the before- tax cost of Abco's debt is 14 percent per annum. Calculate the cost of capital of the proposed new project, specifying the assumptions on which your calculations are based.
here is the following extension of the three date diamond-dybvig model agents can invest in following three possible
Department 65 has an issue of preferred stock that pays a dividend of $4.00. The preferred stockholders require a rate of return on this stock of 9%. At what price should the preferred stock sell for? Round
Find an example when a company took up too much risk and was unable to cope with it. Give a short summary of the situation and also provide your own comments on the following issues:
you are the financial manager of a company of your choice. you have been asked to share with a group of college interns
An alternative approach to hedging risk is to focus instead of diversify. In this approach, which is just the opposite of diversifying, you would only invest in one thing.
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over..
Prepare the Bank reconciliation for April. Prepare the necessary journal entries using T-Accounts.
assume that you have the following information on project a i it will yield cash flows of 960 per year forever ii the
maxwell industries has a debt-equity ratio of 1.5. its wacc is 11 and its cost of debt is 8 . the corporate tax rate
Your firm is considering an investment that will cost $750,000 today. The investment will produce cash flows of $250,000 in year 1, $300,000 in years 2 through 4, and $100,000 in year 5. What is the investment's discounted payback period if..
assume that a software organization is considering creating a new software product. assume that the new software
Suppose that the company sold 8,000 units during the ear. What would the variable costing net income have been? What would the full costing net income have been?
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