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In May 2015, the credit rating agencies downgraded the debt of General Motors Corporation to junk status. (Please provide 1-2 detailed paragraphs per answer)
a: Discuss the effect of this drop in credit status on the company's WACC
b: If you have been suing the YTM for the firm's bonds as your estimate of the cost of debt capital and you use the same estimation procedure following the downgrade, has your estimate become more or less reliable? Explain.
To tap into the above market, you have already entered into a sizeable investment in a commercial property. The currency of Denmark is Danish Kroner, or Krone, and we use DKK for it below.
Assume the current Treasury yield curve shows that the spot rates for six months, one year, and a half years are 1%, 1.1%, and 1.3%, all quoted as semi annually compounded APRs. What is the price of a 1000 par, 4% coupon bond maturing in one and a ha..
(Cost of preferred stock) The preferred stock of Gator Industries sells for % 34.77 and pays $2.73 per year in dividends. What is the cost of preferred stock financing? What is the floatation costs adjusted initial outlay for issuing the preferred s..
During a field examination of GNT's income tax returns for 2012 and 2013, the revenue agent discovered that the treasurer had systematically omitted substantial income items and initiated deductions to minimize the corporation's tax. The agent suspec..
A fire has destroyed a large percentage of the financial records of the Goodwin Industries. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.56 percent. If sales ..
When choosing which types of assets to hold, the buyer must determine the trade-off between:
The company has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 50% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would b..
Income Statement Preparation: Prepare an Income Statement, in proper format, for 2015 for Johnson Medical Supplies (JMS) from the following information: Calculate the operating expenses, operating profit, and profit percentage. Did JMS have a good ye..
Sketch the Human Development Index (HDI) (y-axis) vs. Per Capita Energy Use (x-axis) for the countries of the world. Explain what HDI is. Explain what Per Capita Energy Use is and how it is calculated. Comment on the various aspects of this graph (i...
Suppose that a security analyst uses the constant dividend growth model to determine the theoretical share price of a corporation. The annual dividend just paid was $3.00 per share. The analyst assumes a required rate of return of investors of 15%, a..
The municipal government has imposed a temporary, five-year tax increase on the value of property that will raise $80 million at the end of the first year. Property values are setimated to grow at a rate of 3 percent per year. What is the present val..
Compute the weighted average cost of capital for a firm of your choosing (they must have bonds and common stock outstanding, preferred stock is optional). You should use current market information to determine the firm’s current cost of equity, cost ..
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