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You want to calculate the WACC for auto parts retailer AutoZone (AZO). Complete the following steps to construct a spreadsheet that can be updated.
Using an input for the ticker symbol, create hyperlinks to the web pages that you will need to find all of the information necessary to calculate the cost of equity. Use a market risk premium of 7 percent when using CAPM.
Create hyperlinks to go to the FINRA bond quote website and the SEC EDGAR database and find the information for the company’s bonds. Create a table that calculates the cost of debt for the company. Assume the tax rate is 35 percent.
Finally, calculate the market value weights for debt and equity. What is the WACC for AutoZone?
Assume you have a one-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. If you expect their yields to mat..
A stockbroker has proposed two investments in lowrated corporate bonds paying high interest rates and selling at steep discounts (junk bonds). The bonds are rated as equally risky and both mature in 15 years. Construct a choice table for interest rat..
You will receive $1,000 at the end of the next 10 years, assuming a 7% discount rate, what is the present value of the cash flows?
A five-year project has an initial fixed asset investment of $290,000, an initial NWC investment of $25,000, and an annual OCF of - $35,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required r..
Will the yield to maturity on the two bonds differ?
Investment banks will oftentimes "split" the interest and principal payments on US government bonds into two parts and sell each part separately. Consider a vanilla government bond with 30 years to maturity, a coupon rate of 10 percent, a face value ..
The yield to maturity on a bond is:
P/E ratio gives us a simple way to conduct equity valuation, but there are still some shortcomings in P/E analysis. What are the potential shortcomings when we use P/E ratio to evaluate equity price? What are the alternative valuation ratios/models t..
how much would you pay for the note to earn 12% How much would you pay to earn 8%.
Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in sales dollar..
What is the future value at the end of the third year?
Aggressive Corporation has a proposal for a project that will have the following cash flows in the next three years. The board of Aggressive will not approve any projects that will pay back in more than 3 years. What is the payback period and the dis..
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