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1. Please calculate the Weighted Average Cost of Capital if the cost of debt is 10% with a 30% tax bracket. Also using the Gordon Growth Model, growth is 12%, the dividend next year is $1.25 and the price of the stock is $18.00 . The Capital Structure is 50% debt and 50% equity. Please propose a way to lessen the cost of debt.
2. Using the Capital Asset Pricing Model, assume the Risk Free Rate is 3%, the Market rate is 10% and the Beta is 1.7 Please explain how Beta measures risk for a firm.
3. Please explain the different capital budgeting techniques, please discuss the pros and cons.
4. Please calculate the value of a 30 year bond with a 10% coupon , that is due in 8 years, with current interest rates of 6%. Please explain why it would be a premium or discount bond.
5. Please explain the relationship between dividends and stock price growth as explained by the Gordon Growth Model
6. Please explain what is a callable bond. Why would a firm call a bond.
When returns from a project can be assumed to be normally distributed, such as those shown in Figure 13-6 (represented by a symmetrical, bell-shaped curve), the areas under the curve can be determined from statistical tables based on standard deviati..
Consider two mutually exclusive projects. Project A lasts 3 years and has the following cash flow:
With any hedge Your losses on one side should about equal your gains on the other side You should try to make money on both sides of the transaction: that way you make money coming and going You should spend at least as much time working the hedge as..
Who issues commercial paper and for what purpose? What is the document called that lists the terms of a bond?
If Baker undergoes a 2-for-1 stock split, what is the new divisor for the price-weighted index?
Calculate the nominal amount
You deposited $11175 in a savings account that pays 9.24 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather ..
Illness can dramatically impact a person’s ability to achieve a specific financial goal. An aging society and health treatments and pharmaceuticals that extend lifespans increase the likelihood that many people will enter long-term care facilities fo..
What is the total payoff (including all fees) for the GP of fund A and B, respectively?
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..
You have just been assigned as your organization's training manager and must conduct a new needs assessment for a new project. Describe the method you would use.
Find the price of an American call option on this stock that expires in 4 months at $40 strike.
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