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1. Calculate the value added to the shareholders if they had the opportunity to invest in a stripper well project for $600,000. If oill sold at $30 a barre, it would pay a free cash flow of $150,000 per year and If oil could be sold for $40 a barrel it would have a free cash flow of $600,000 per year. There is an equal probability of each price At the end of the first year you could invest an additional $300,000 and increase free cash flow to $975,000 per year if the price remained at $40.00 per barrel and be $175,000 if it was $30.00 a barrel. If the price is $30 a barrel in the first year, the probability it goes to $40.00 for the second year of 20% and S40 per barrel price would be 80%, otherwise the percentages would be 10% remaining at $30 per barrel and 90% being $40 per barrel.
2. What is the cost of capital for a firm with 40,000 of S1000 bonds with a coupon rate of 5% due in 6 years that sells for S950 per bond, it has floatation costs of 4% of any new bond and can issue new debt at the present market rate, t has 100 par, 5% dividend preferred stock with a floatation cost of 8%, it has 1.000,000 shares of preferred outstanding it has 50,000,000 shares of common stock outstanding with floatation costs of 10%. It pays dridend of S300 pershare with no dividend growth rate. It has a beta of 14 and an equity premium of 5%. The risk free rate is 4% and the free cash flow is growing at 5% per annum. It needs to raise S2000000 in additional funds. Which avenue should it pursue and why?
Find the future value of today's $500 in 5 years under each of the following conditions.
A U.S. company can borrow 12,000 pounds in Great Britain for 4% interest, paying back 12,480 pounds in one year. Alternatively, the U.S. company can borrow an equivalent amount of U.S dollars in the United States and pay 8% interest. Assuming capital..
What opportunities do you foresee in California real estate projects in the next 5 years. What is the downside of this future real estate opportunities?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. If the yield to maturity is 7.9 percent, what is the current price of the bond?
You purchased land 3 years ago for $40000 and believe its market value is now $75000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $165000, an expense that you plan to depreci..
Assume that the annual expense ratio is netted out of the fund's return.
Ginger stock sells for $94.50 per share, and the stock is about to go ex dividend. What do you think the ex-dividend price will be?
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facil..
Find the interest rate (or rates of return) in each of the following situations. You borrow $700 and promise to pay back $728 at the end of 1 year.
Suppose Pepsico's stock has a beta of 0.62. If the risk-free rate is 4% and expected return of market portfolio is 8 %, what is Pepsico's equity cost of capital
Matt is self-employed as a carpenter. He made $42,000 after expenses in 2012. How much did he contribute to FICA taxes?
Whose viewpoint represents the proper objective for the budgeting process?
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