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Meacham Corp. wants to issue bonds with a 9% coupon rate, a face value of $1,000, and 12 years to maturity. Meacham estimates that the bonds will sell for $1,090 and that flotation costs will equal $15 per bond. Meacham Corp. common stock currently sells for $30 per share. Meacham can sell additional shares by incurring flotation costs of $3 per share. Meacham paid a dividend yesterday of $4.00 per share and expects the dividend to grow at a constant rate of 5% per year. Meacham also expects to have $12 million of retained earnings available for use in capital budgeting projects during the coming year. Meacham's capital structure is 40% debt and 60% common equity. Meacham's marginal tax rate is 35%.
a. Calculate the after-tax cost of debt assuming Meacham's bonds are its only debt.b. Calculate the cost of retained earnings.c. Calculate the cost of new common stock.d. Calculate the weighted average cost of capital assuming Meacham's total capital budget is $30 million.
Describe the relationship between type of reward structure employed by an organization for its employees and employee effectiveness and work productivity.
A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?
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Suggest a modification to the structure which will remedy the impact of structure on responsiveness.
Suppose your uncle has given you three options for your inheritance. You can have $10,000 now; $2,000 per year for the next eight years; or $24,000 at the end of 8-years.
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Compute the Present value of the various annuities and Compute the present value of the following
Jones Hardware had common stock of $9,500 and retained earnings of $3,800 at the beginning of the year. At the end of the year, the common stock balance is $9,600 and the retained earnings account balance is $4,200.
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Average daily collections are $122,000, and the required rate of return is 5 percent per year. Assume 365 days per year. What is the daily dollar return that could be earned on these savings?
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