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A company (financed only by debt and common stock) changes its capital structure from 20% Debt to Assets to 80% Debt to Assets. Which of the following scenarios is most likely?
Cost of Debt Increases, Cost of Equity Decreases, and WACC Decreases.
Cost of Debt Increases, Cost of Equity Decreases, and WACC Increases.
Cost of Debt Decreases, Cost of Equity Increases, and WACC Decreases.
Cost of Debt Decreases, Cost of Equity Decreases, and WACC Decreases.
Cost of Debt Increases, Cost of Equity Increases, and WACC Decreases.
The Sleeping Flower Co. has earnings of $2.30 per share. The benchmark PE for the company is 16. What stock price would you consider appropriate? (Round your answer to 2 decimal places. (e.g., 32.16)) Stock price $ What if the benchmark PE were 19? (..
A Euro-based MNC will receive C$40 million in 3 months. Based on the following information, implement two hedging strategies for the MNC. Which hedging strategy would you recommend? Explain. Spot rate €0.9422/C$ 3-month forward rate €0.9440/C$ € inte..
You are interested in buying a used car that costs $15,000. determine the uniform annual cost for this car if it is kept for 6 years.
Baxter Company just paid a dividend of $2.00 per share and is expected to pay a dividend one year from today of $2.14 per share. The future growth rate in dividends is expected to remain equal to the growth rate in Year 1 forever. Given the informati..
Which one of the following risks is irrelevant to a well-diversified investor? The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21?
Filer Manufacturing has 7.7 million shares of common stock outstanding. The current share price is $47, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. Assume that the overall cost of debt is the weighted..
Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.40 per unit, and the variable labor cost is $6.80 per unit. What is the variable cost per unit? Suppose NSI incurs fixed costs of $760,000 during a year in wh..
The world's largest carpet maker has just completed a feasibility study of what to do with the 16, 000 tons of overruns, rejects, and remnants it produces every year. The company's CEO launched the feasibility study by asking, why pay someone to dig ..
A machine, with a first cost of $20,000, is expected to save $1,500 in the first year of operation and the savings should increase by $200 every year until (and including) the ninth year, thereafter the savings will decrease by $150 until (and includ..
What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capital?
Net Income and Retained Earnings LO2, 4 Nova Corporation reports the following as of December 31: Revenues $10,000 Beginning retained earnings 20,000 Expenses 8,000 Dividends 1,000 Required Calculate net income and ending retained earnings for the ye..
Bruce & Co. expects its EBIT to be $49,000 every year forever. The company can borrow at 8 percent. The company currently has no debt, and its cost of equity is 11 percent. If the tax rate is 35 percent, what is the value of the company? What will th..
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