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Capital Co. has a capital structure, based on current market values, that consists of 48 percent debt, 18 percent preferred stock, and 34 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 14 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) After tax WACC = %
The SignPost has a WACC of 12%. They are contemplating growing their sales and projections indicate a return on invested capital (ROIC) of 9.5% as a result of the sales growth. The growth in sales: a) destroys value, b) adds value c) cannot be determ..
Would your portfolio be riskless? Explain. Now suppose the portfolio consists of $250,000 of 30-day Treasury bills. Every 30 days your bills mature, and you will reinvest the principal ($250,000) in a new batch of bills. You plan to live on the inves..
A 25 year bond issued today by Carris, Inc. has a coupon rate of 11%, a required return of 12% and a face value of $1000. The bond will be sold 8 years from now when interest rates will be 9%. what is the Beginning value of the bond when it is iossue..
Dorothy lacks cash to pay for a $720 dishwasher. She could buy it from the store on credit by making 12 monthly payments of $65. The total cost would then be $780. Instead, Dorothy decides to deposit $60 a month in the bank until she has saved enough..
The Bull bank has a $100,000 30 year loan that was made 6 months ago to a homeowner who is making monthly payments to yield an interest rate of 7% compounded monthly. It would like to sell the loan to increase its overall liquidity. What is the curre..
Please show/explain work. Scott Investors, Inc, is considering the purchase of a 412,000 computer with an economic life of 5 years. The computer will be fully depreciated over five years using the straight-line method.
Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $50,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 9%, and the loa..
Describe the Federal Reserve (Fed)’s current policy. Is the policy focused on stimulating the economy, reducing inflation, evenly balanced, or other areas? Explain your position.
You have been accepted to study international economy at the European Central Bank (ECB) in Frankfurt. You will need $10,500 every 6 months (beginning today) for the next three years to cover tuition and living expenses.
Big Rapids Homes has a bond issue outstanding that pays $60 annual coupon paid semi-annually and matures in 30 years. The bonds have a par value of $1,000 and a quoted market price of 95.5. What is the yield to maturity?
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..
Showboat Theatres has paid annual dividends of $0.32, $0.48, and $0.56 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to re..
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