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Swizer industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firm’s WACC minus 3 percent. Division Y has more risk and its projects assigned a rate equal to the firm’s WACC plus 4 percent. The company has a debt equity ratio of .55 and a tax rate of 30 percent. The cost of equity is 15.0 percent and the after-tax cost of debt is 5.0 percent. Presently, each division is considering a new project. Division Y’s project provides a 12.0 percent rate of return and division X’s project provides a 7.0 percent return. Calculate the company’s WACC (rounded to the nearest tenth percent).
Given the information in the previous problem calculate the project WACC for division X. Also calculate the project WACC for division Y. Which projects, if any should the company accept?
The Absolute Zero Co. just issued a dividend of $2.80 per share on its common stock. The company is expected to maintain a constant 5.8 percent growth rate in its dividends indefinitely. If the stock sells for $56 a share, what is the company’s cost ..
You own a portfolio that has $3,500 invested in Stock A and $4,500 invested in Stock B. If the expected returns on these stocks are 11 percent and 14 percent, respectively, what is the expected return on the portfolio?
What is the incremental cash flow of the investment for year 4? Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
The constant dividend growth model may be used to find the price of a stock in all of the following situations except:
What is the aftertax cost of debt? Which is more relevant, the pretax or the aftertax cost of debt?
Compute your chosen firm's gross profit margin, operating income margin, and net income margin for the past 3 years.
BUYING ON MARGIN HOMEWORK SPRING 2017 Initial margin req. 0.50 Maintenance margin req. 0.30 Call rate 0.025 You buy 1,000 shares of Facebook on February 1, 2016 at $115 a share. What is the dollar amount of your initial margin?
You are evaluating project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. What will the cash flows for this project be?
Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5 percent paid semiannually and 14 years to maturity. What is the price of the bond?
A farmer in Mobile decides to purchase a machine that converts manure into biogas. He has 100 cows that create a total of 40 lb of manure every day, 365 days per year. Each pound of manure can be used to produce 1 ft^3 of biogas which can be sold for..
Suppose a firm's $1,000 par value convertible bond is currently worth $925.
what is the amount of total cost recovery deduction ?if bonus depreciation is extended into 2015??
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