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We would like to compute the Harden Company's costs of capital and evaluate the projects of this company. This is the information related to the market and this company: credit rating is AAA by Moody's. Its stock price per share is $20, book values per share of the stock is $10, the number of the outstanding shares is 1 million, and the beta of its stocks is 1.10. On its balance sheet, we know the book value of its total debt is $10 million and the book value of its total equity is $10 million. Market portfolio return is 15%, US treasury bond yield is 3%, and the credit risk premium of AAA rating bonds is 0.5%. Assume the company's corporate tax rate is 35%. Compute the company's cost of debt capital; Compute the cost of equity capital. Campany the market value of equity. This term is also called market capitalization. Compute the weight of debt. Explain why we use this information from the balance sheet. Compute the WACC. If the company has project: in the beginning, the investment cost is $2500. After one year, two years, and three years, there will be a $1000 cash inflow in each year. This project uses the entire capital of the company. Find an appropriate discount rate. Compute NPV. Does this company accept this project?
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 12 percent, –9 percent, 20 percent, 17 percent, and 10 percent. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year period..
Lorenzo owns two apartment buildings. He acquired forsythia acres on February 21, 1998, for $300,000. Neither apartment complex qualifies for low income housing. if Lorenzo elects to write off the cost of each building as quickly as possible, what is..
?Financial Analysis Comparison - I need to receive information on both companies - Data Requested The Coca-Cola Company.
Due to increasing value of the Yuan the Chinese electronics manufacturers have been suffering losses. At the same time the cost of a rare-earth mineral used in production of their goods has been increasing steadily due to increasing demand. You have ..
By how much would the ROE change in response to the change in the capital structure?
Compared to the FDX call option above with another FDX call option with an exercise price of $190 and a premium of $1. What might an investor who prefers the $190 strike, $1 call option expect compared to an investor who prefers the $180 strike price..
Predicated on a tax court case, one of the below doctrines was disallowed. What strategy was employed and how was it conducted. based on several important doctrines. The assignment of income doctrine - states that income must be taxed to the entity t..
What options should be purchased to provide protection against the value of the portfolio falling below 554 million in one year's time?
If the firm currently pays no cash dividend, what is the impact of a 10 percent stock dividend on the wealth position of the firm's existing stockholders?
If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?
During 2011, Abbott Laboratories decreased its discount rate used to calculate pension obligation from 5.4% to 5.0%. The effect on the company’s pension expense for the year and pension obligation balance at year end is:
What would be the impact of the most recent financial regulations on you and your institution if you proceed with these risky investment projects?
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