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A firm is partly debt financed with 4 year bonds that all pay a 7% annual coupon. The total book value of the debt is $5 million with $1,000 par value per bond. The current yield to maturity on the bond is 11%. The firm also has preferred equity with book value of $1.5 million and a par value of $10 per share. The preferred stock currently sells for $12 per share and pays an annual dividend of $1. Assuming no taxes, what is the firm’s approximate weighted average cost of capital?
a) 6% b) 8% c) 10% d) 12% e) 14%
Which of the following activities will expose Digby to the most risk of needing an emergency loan?
Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 10.2 percent. The company also has 4.7 million shares of common stock outstanding. The stock has a beta of 1.9 and sells for $55 a share. The U.S. Tr..
Value of Operations of Constant Growth Firm EMC Corporation has never paid a dividend. Its current free cash flow of $520,000 is expected to grow at a constant rate of 4.2%. The weighted average cost of capital is WACC = 10.5%. Calculate EMC's estima..
Suppose policy makers pass a budget that results in an increase in the budget deficit.
What nominal (riskless) rate of return for $ investments can an US investor earn by benefiting from the above rates?
Cleveland State University is selling bonds to fund a new Convocation Center. Draw the cash flow diagram from the investors perspective.
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 4.1% r2 = 4.5% r3 = 5.2% r4 = 6.0% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
The preferred stock of Gator Industries sells for $34.63 and pays $2.77 per year in dividends. What is the cost of preferred stock financing? What are the floatation costs for issuing the preferred share and how should this cost be incorporated into..
Carry- all plans to sell 1300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. variable cost are projected to be $20 per unit. micheal company offers to pay $20,800 to buy 600 units from carry-all. total fixed cost are 700..
Industries that generally perform well when other industries are performing well are referred to as:
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 6 percent and the maximum allowable discounted payback period is three years. Discounted payback period years Should the project be accepted or rejected? Rej..
What is the Macaulay duration of a 6 percent coupon bond with twelve years to maturity and a current price of $1,062.40? What is the modified duration?
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