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Longstreet Communications Inc. (LCI) has the following capital structure, which it considers to be optimal: debt = 25%, preferred stock =15%, and common stock =60%. LCI"s tax rate is 40 percent and investors expect earnings and dividends to grow at a constant rate of 9 percent in the future. LCI paid a dividend of $3.60 per share last year (D0), and its stock currently sells at a price of $60 per share. Treasury bonds yield 11 percent; an average stock has a 14 percent expected rate of return; and LCI"s beta is 1.51. These terms would apply to new security offerings:
Preferred: New preferred could be sold to the public at a price of $100 per share, with a dividend of $11. Flotation costs of $5 per share would be incurred.
Debt: Debt could be sold at an interest rate of 12 percent.
a. Find the component costs of debt, preferred stock, and common stock. Assume LCI does not have to issue any additional shares of common stock.
b. What is the WACC?
Calculate present value if the discount rate is 12%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Shadow corp. has no debt but can borrow at 6.5%. The firm's WACC is currently 10.4% and the tax rate is 35%.
Matthew wants to take out a loan to buy a car. He calculates that he can make payments of $4000 per year. If he can get a five - year loan with an interest rate of 7.5%, what is the maximum price he can pay for the car?
the company is cvr energy1. secure the 2011 annual report and 10k for that company from its website and describe
Income from a precious metals mining operation has been decreasing uniformly for five years. If income in year one was $100,000 and it decreased by $10,000 per year through year five,
Skilled nursing facilities continue to grow in the United States. It is currently funded primarily by Medicare, Medicaid, and private pay. What thoughts do you have in reforming the methods for paying for long term care services?
Global Technology's capital structure is given below, The after tax cost of debt is 6.5%; the cost of preferred stock is 10%; and the cost of common equity is 13.5%.
rights offerings borkin incorporated is proposing a rights offering. currently there are 560000 shares outstanding at
imagine you are a digital forensic investigator for a healthcare organization. you learn from your internal information
1. Should management investigate only unfavorable variances or favorable ones too? Why so or not?
Which one of the following is the best example of a sunk cost?
Tunney Industries can issue perpetual preferred stock at a price of $74.00 a share. The stock would pay a constant annual dividend of $6.00 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places.
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