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The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data:
(1) rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%.
(2) rRF = 5.00%, RPM = 6.00%, and b = 1.25. (3) D1 = $1.20, P0 = $35.00, and g = 8.00% (constant).
You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference?
You are analyzing a project and have developed the following estimates: unit sales = 1,320, price per unit = $79, variable cost per unit = $43, fixed costs = $24,900. The depreciation is $11,300 a year and the tax rate is 40 percent.
Red Cat Firecrackers is considering whether to build a large or small factory to produce its firecrackers. Regardless of the production method, each bundle of firecrackers sells for $4.00.
Investors generally can make one vote for each share of stock they hold. TIAA-CREF is the largest institutional shareholder in the United States; therefore it holds many shares and has more votes than any other organization.
Holland Construction Co has an outstanding 180 day bank loan of $475,000 at an annual interest rate of 7.5%. The company is required to maintain a 15% compensating balance in its checking account.
Sally is choosing between two bonds both of which mature in 15 years and have same level of risk. Bond A is a municipal bond that yields 5.75%. Bond B is a corporate bond that yields 7.75%.
A specific automotive part that a service station stocks in its inventory has an 8% chance of being defective. Suppose many cars come into the service station needing this part each week.
An individual is currently 30 years old and she is planning her financial needs upon retirement. She will retire at age 65 (exactly 35 years from now) and she plans on funding 20 years of retirement with her investments.
The MerryWeather Firm wants to raise $15 million to expand its business. To accomplish this, the firm plans to sell 10-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 4 percent
The Pettit Corporation has annual credit sales of $2 million. Current expenses for the collection department are $30,000, bad debt losses are 2% and the days sales outstanding is 30 days.
YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each. when the incremental revenues and expenses are analyzed, which is the financial impact?
results regarding the equilibrium interest rate and national income using the IS-LM analysis for each of the following: a. Congress decides to pass an election year tax cut.
You have a car loan with a nominal rate of 7.29 percent. With interest charged monthly, what is the effective annual rate (EAR) on the loan
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