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Calculate the WACC based on the following information. Assume tax rate is 35%.
Debt: $10M face value, current price $10.8M, 6.4% coupon rate, 25 years to maturity, semiannual coupon payment. (Hint: cost of debt is YTM of the bond)
Equity: 495,000 shares outstanding, market price $63, beta 1.15.
Market: MRP 7%, 3.2% risk free rate.
What is the net asset value (NAV)? what is its premium or discount as a percent of NAV?
Your financial firm needs to borrow $200 million by selling time deposits with 270 day maturities. If interest rates on comparable deposits are currently at 2.5%, what is the cost of issuing these deposits? Suppose interest rates decline to 2%. What ..
The Granite Paving Company is all-equity financed and has the following free cash flows in years 1-4: $3 million ($3M); $3.7M; $4M; $4.2M. After year 4, the firm is expected to grow at a sustainable rate of 3% per annum. With a WACC of 12%, what is t..
Racette & Sons (R&S), a Colorado shipyard, has approached RNI with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. Calculate the present value of..
Depreciation is calculated according to 5-year MACRS, and the firm's tax rate is 42%. What is the IRR of the project?
Bond J has a coupon rate of 5 percent and Bond K has a coupon rate of 11 percent. Both bonds have 19 years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price ..
Tempe is considering four mutually exclusive public-works projects. Their costs and benefits are presented in the table below. Each project has a useful life of 50 years and the MARR is 12% per year. Which of the projects, if any, should be selected?..
The Wet Corp. has an investment project that will reduce expenses by $20,000 per year for 3 years.
Consider a two-period, two-state world. Let the current stock price be 45 and the risk-free rate be 5 percent. Each period the stock price can go either up by 10 percent or down by 10 percent. A call option expiring at the end of the second period ha..
What would be the before-tax cost of debt (rd) for a company that currently has 10-year, 12% annual coupon bonds outstanding? The bonds are currently selling in the market for $1,200 and have a $1,000 par value. Given the information found in questio..
Discuss the economic implications of your observations.
What action should the PM take? You will need to calculate the futures price of the index.
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