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Fast Cash Limited has the following information and a tax rate of 30 percent. . Debt 700, 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 95 percent of par, the bonds make semi-annual payments Common stock 350,000 shares outstanding, selling for $60 per share; the beta is 1.05 Preferred stock 8,000 shares of 6 percent preferred stock outstanding, currently selling for $115 per share Market 7 percent market risk premium and 4 percent risk-free rate Determine the company’s WACC by computing the follow:
1. Total Market value for the company.
2. After-tax Cost of Debt
3. Cost of Common Stock
4. Cost of Preferred Stock
5. WACC
The market and Stock J have the following probability distributions: Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. As an equity analyst you are concerned with what wi..
How should investment returns be measured? Do financial services companies have an incentive to provide nominal rather than true rates of return in their advertising? Should they be required to provide nominal, real, and true rates of return?
Sally Johnson loaned a friend $10,000 at 15% interest, compounded annually. The loan will be paid in five equal end-of-year payments. Sally expects the inflation rate to be 12%. After taking inflation into account, what rate of return is Sally receiv..
In some detail, describe the portfolio management process. Explain how active managers can add value relative to their benchmark. Explain how it is possible for a portfolio manager to outperform a benchmark but fail to meet the client’s investment ob..
Each of the following is a disadvantage of the partnership form of business organization EXCEPT
Compute the NPV for Project M if the appropriate cost of capital is 9 percent. Should the project be accepted or rejected? Accepted Rejected
Declining Growth Stock Valuation Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. what is the value of Brushy Mountain's stock.
The calculation of the cost of capital depends upon the historical cost of funds. The discount rate that equates a future stream of expected dividends to the current price is a good approximation of the cost of common stock. The cost of retained earn..
The returns on stocks A and B are perfectly negatively correlated (). Stock A has an expected return of 21 % and a standard deviation of return of 40%. Stock B has a standard deviation of return of 20%. The risk-free rate of interest is 11 %. What mu..
Which of the below statements are true regarding bonds? Interest is generally paid out every six months. The face value of the bond is called the market value. The annual interest rate is called the coupon rate.
1. The Los Angeles Lakers are sold for 650 Million. At a tax rate of 25% what is the new owner's yearly tax savings if he uses straight line depreciation of the purchase price over the full 15 years allowed by the IRS?
Johanson VI Advisors. Issued $1000 par value bonds a few years ago with a coupon rate of 7 percent, paid semiannually. After the bonds were issued, interest’s rates fell. Now with three years remaining before they mature, the bonds sell for $1,055.08..
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