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ABC Company has raised $150 million by issuing bonds, $50 million by issuing preferred stock and another $50 million by issuing common stock. The cost of debt is 6%, the cost of preferred stock is 8% and the cost of common stock is 10%. Calculate the WACC if the tax rate is 35%.
To calculate the number of years until maturity, assume that it is currently May 2013. Rate Maturity Mo/Yr Bid Asked Chg Ask Yld ?? May 24 103.5514 103.6396 +.3067 2.409 5.424 May 29 104.5004 104.6461 +.4341 ?? 6.183 May 39 ?? ?? +.5457 4.111 Require..
During 2014, Paul sells residential rental property for $300,000, which is acquired in 1994 for $150,000. Paul has claimed straight-line depreciation on the building of $57,525. What is th4e amount and nature of Paul's gain on the sale of the rental ..
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a local brokerage firm, and her boss is selling securities that call for 4 payments of $50 (1 payment at the end of each of the next 4 years) plus an extra paym..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wort..
The current stock price for a company is $34 per share, and there are 7 million shares outstanding. This firm also has 170,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 9%, 19 years to maturity,..
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 5 % 20 % B 8 % 80 % Correlation = –1. C..
Briefly discuss ten ratios you think may be important, and include ratios from the different categories; LIQUIDITY: Days' Sales in Receivables Accounts Receivable Turnover A/R Turnover in Days Days' Sales in Inventory Inventory Turnover Inventory Tur..
Why does free cash flow and dividend discount model have a positive growth rate while residual income has a negative growth rate?
A utilisation of cash flow analysis is setting the bid price on the project. To calculate the bid price we set the project NPW equal zero and find a required price. Thus the bid price represents a financial break even level for the project. What bid..
A portfolio has an expected rate of return of 14% and a standard deviation of 22%. The risk-free rate is 4%. An investor has the following utility function:. U = E(r)-1/2(A)σ2 Which value of A makes this investor indifferent between the risky portfol..
A printing press was purchased 4 years ago for $100,000. The current market value is $45,000, which will decline as follows over the next 5 years: $40,000, $33,500, $28,000, $24,000, and $17,000. The O & M costs are estimated to be $16,000 this year...
What is the impact of interest rate cuts on bond prices? What is the relationship between interest rates and the cost of capital? What is the impact of cheaper borrowing on the firm's investment decision?
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