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Suppose your company needs $15 million to build a new assembly line. Your target debt-equity ratio is 0.85. The flotation cost for new equity is 12.5 percent, but the flotation cost for debt is only 6.5 percent. Requirement 2: What is your company’s weighted average flotation cost, assuming all equity is raised externally? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Weighted average flotation cost % Requirement 3: What is the true cost of building the new assembly line after taking flotation costs into account? (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g.,1,234,567)) True cost $ References
What is the present value of the Coca-Cola futures contract? If the contract settles at 105-8, are current market interest rates higher or lower than the standardized rate on a futures contract? Explain. What is the implied annual interest rate on th..
A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8% nominal interest on retirement savings, and the couple realizes that the annual inflation ra..
You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio?
Last year Kruse Corp had $420,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total d..
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 –$43,000,000 1 67,500,000 2 –18,000,000 Required: (a) If the company requires a 11 percent return on its investments, what is the NPV o..
St. Charity Hospital issued a 12 percent annual payment bind for $1,000, which now has 10 years remaining to maturity and sells for $1,100.00. The vine has a call provision that allows the bond to be called in four years for the price of $1,060. what..
To expand its operation, Amarillo Industries has applied to the Local Bank for a 3-year, $3,500,000 loan. Prepare a loan amortization table assuming 10 percent rate of interest. Be sure to show “payment”; “principal” and “interest” for each year.
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.30 for each of the 15 million shares sold. The initial offering price was $21.00 per share, and the stock rose to $23.40 per share in the first few minutes of t..
You will document your understanding and learning relative to the course requirements as summarized in the course description. This must include how you will or could use the learning in your personal and/or professional decision making.
A 4-year bond with a 6.50% coupon and a 9.50% yield to maturity is currently worth $903.87, how much will it be worth 1 year from now if interest rates are constant?
Review the definitions of transaction exposure and economic exposure (no need to provide the definition). How are they different? Please provide an example of a transaction or economic exposure.
Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $20, $10, $6.2 and $2.7. Afterwards, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the s..
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