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A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity.
Assume the fwill not have enough retained earnings to find the equity portion of its capital budget.
Also, assume the firm accounts for flotation costs by adjusting the cost of capital.
Given the following information, calculate the firm's WACC. rd=8%,D0=$2.00, Tax rate=40%, p0=$25, Growth=0%,flotation cost on common equity=15%.
Complete the following using compound future value. Round answers to nearest cent. time 12 years principal $15,000 rate 3 1/2% compounded annually what is teh amount? and interest?
Blue Bull, Inc., has a target debt-equity ratio of .81. Its WACC is 8.5 percent, and the tax rate is 34 percent. Required: (a) If the company’s cost of equity is 12.1 percent, what is its pretax cost of debt? what is the cost of equity?
We Guessed & You're Wrong has continued to operate and grow. In fact, business has increased to the point where new partners or staff might be considered. A new partner would bring capital of $1,000,000 to the firm and additional opportunities. Alter..
Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?
The spot and 30 day forward rates for the Dutch guilder are $.3075 and $.3120, respectively. The guilder is said to be selling at a forward. A ________ involves simultaneously borrowing and lending activities in two different currencies to lock in th..
Franz established an irrevocable trust to provide income to his mother for life and the remainder interest to his son. He transferred $400,000 to the trust today. The IRS Section 7520 rate is 5% and his mother is age 82. What is the amount of the tot..
Payments made out of a firm's earnings to its owners in the form of cash or stock are called: A. dividends. B. distributions. C. share repurchases. D. payments-in-kind. E. stock splits.
A share of stock is now selling for $105. It will pay a dividend of $7 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 7% and the expected rate of re..
Consider a portfolio that is delta neutral, with gamma of -5,000 and a vega of -8,000. A traded option has a gamma of 0.5 and a vega of 2, and delta of 0.6. Second traded option with gamma of 0.8, vega of 1.2 and delat of 0.5. How could the portfolio..
Using workshop readings and your own online research, write a three-page paper evaluating the Affordable Care Act as an example of federal health policy development, its ramifications on public health, and how the ACA does not fit into the traditiona..
Calculate the price of the following bonds, where F is the face value, c is the coupon rate, N is the number of years to maturity, and i is the interest rate (or discount rate, or yield).
a) The price of a 1-year zero is $96.00, the price of a 2-year 10% coupon bond is $107.30 and the price of a 3-year 8% coupon bond is $102.25. Use the bootstrap method to calculate all zero rates. Given the bonds in (a), what is the price of a 3 year..
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