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Finding the WACC. Given the following information for Janicek Power Co., find the WACC. Assume the company’s tax rate is 35 percent.
Debt: 8,500 7.2 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 118 percent of par; the bonds make semi annual payments.
Common stock: 225,000 shares outstanding, selling for $87 per share; beta is 1.15.
Preferred stock: 15,000 shares of 4.8 percent preferred stock outstanding, currently selling for $98 per share.
Market: 7 percent market risk premium and 3.1 percent risk-free rate
What will be the dollar value of the management team's original $2 million equity investment at the time of the liquidity event?
Compute the gross margin ratio and net profit margin ratio, compare the current ratio and acid-test ratio and compute the debt ratio and equity ratio.
You buy a share of stock, write a one-year call option with a strike price X = $21, and buy a one-year put option with a strike price X = $21. Your net initial cost to establish the entire portfolio is $19.60. What must be the risk-free interest rate..
Waller Co. (WAG) paid a $0.164 dividend per share in 2003, which grew to $0.420 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 14.0 percent? (Round the growth rate, g..
LKM, Inc, wants to issue new 20 year bonds for some much needed expansion projects. The company currently has bonds on the market that sell for $972.78, making semi-annual payments, with a 6.5% coupon rate. What is the yield to maturity of the bond?
International trade agreements eliminate trade barriers between countries, promote investments, infuse competitiveness, enhance productivity, create jobs, and provide consumers with a greater range of options at cheaper prices.
What is the total present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent?
Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the Canadian dollar is Can$1.04 and the six-month forward rate is Can$1.06. Which is worth more, a U.S. dollar or a Canadian dollar?
Brighton Corp. bought an oil rig exactly 6 years ago for $109,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. The rig was just sold to British Petroleum for $34,000,000. What Capital Gain/Loss will Bright..
Suppose you have a short position in a 30-year 6%-coupon bond and a long position in a zero- coupon bond with exactly the same market value and duration. If all zero rates fall by 20 basis points, will your net position rise or fall in value? Explain..
What is a consol and why do changes in market interest rates have a larger impact on its value than 10-year bonds?
MegaDebt Corp. just issued a dividend of $0.85. The firm pays quarterly dividends. The dividends are expected to grow at 0.2 percent each quarter. The shareholders ask for a return of 5.25 percent each year. What is the fair price of MegaDebt stock? ..
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