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As a newly hired financial analyst, your first job at VersaLife Corporation is to calculate the company's cost of capital. The present capital structure, which is considered optimal, is as follows:
Market Value
Debt $80 million
Preferred Stock $10 million
Common Equity $110 million
If VersaLife Corporation issues new debt, then the bond market expects a yield of 7.5%. Preferred stock is trading for $96, has a $100 par value and pays an annual dividend of 8% (the next dividend is due in one year). Common equity has a beta of 1.20, the market risk premium is 5%, and the risk-free rate is 3%. If the firm's tax rate is 40%,what is the weighted average cost of capital?
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.20 million.
What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects
JaiLai Cos. stock has a beta of 0.9, the current risk-free rate is 6.0 percent, and the expected return on the market is 12 percent.
Over a 38-year period an asset had an arithmetic return of 12.40 percent and a geometric return of 10.30 percent. Using Blume's formula, what is your best estimate of the future annual returns over 6 years
A large networking company wants to incorporate your software into their systems and is offering to pay you $511,000 today, plus $511,000 at the end of each of the following six years for permission to do this.
you buy 1500 stocks of LOL inc at $35.50 each. what will be your % return be if you sell your shares a year from now at $37.25, if OCD pays an annual per-share dividend of $.50
find the amount to which 500 will grow in 5 years if the investment earns 12 percent compounded a) annually b) semiannually c) monthly.
From reviewing Wal-Mart TYears of Data, which four quarters is normally best for Wal-MArt and what is the reason why it the best quarter and which quarters are the worst
You want to by a boat and can afford payments of $350 per month for six years. The annual interest rate is 7% compounded monthly.
To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $875, and has a par value of $1,00..
You buy a zero coupon bond at the beginning of the year that has a face value of $1000, a YTM of 9 percent, and 12 years to maturity. You hold the bond for the entire year.
MS Energy has a target capital structure of 30% debt, 10% preferred stock, and 60% common equity. The company's after-tax cost of debt is 5%, its cost of preferred stock is 8%, and its cost of retained earnings is 12%.
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