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Spam Corp. is financed entirely by common stock and has a beta of .95. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.40 and a cost of equity of 13.51%. The company's stock is selling for $62. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with an interest rate of 5.5%. The company is exempt from corporate income taxes. Assume MM is correct
a. Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
b. Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
c. Calculate the price-earnings ratio after the refinancing. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. Calculate the stock price after the refinancing.
e. Calculate the stock's beta after the refinancing. with explanation
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another tool used to evaluate projects is called the profitability index pi or benefitcost ratio. this index is
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The sample revealed a mean of 11.80 ounces and a sample standard deviation of 0.5 ounces. At a 5%(0.05) level of significance, test to see if the mean of the population is at least 12 ounces. What is your Conclusion?
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Contrarious Calandra. Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarian-as opposed to most of the forecasts.
a. What is the price of a? one-year American put option on XAL stock with a strike price of ?$77 per? share?
Identify an entrepreneurial venture and in a 250-300 word response, answer the following questions: What circumstances might encourage the entrepreneur to enter into a new business area by acquisition? What different circumstances would encourage ..
Why is understanding ROE and EPS important to a company's value?
The following table is taken from the 2003 financial statements of McDonald's and Wendy's! In 2003, what were McDonald's inventory turns? What were Wendy's inventory turns
What would be the value of this bond if interest rates fall to 5% the day after it is purchased? If interest rates fell to 5% after one year, what would the bond be worth at that point?
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