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Titan Mining Corporation has 10.4 million shares of common stock outstanding and 390,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $53 per share and has a beta of 1.20, and the bonds have 20 years to maturity and sell for 95 percent of par. The market risk premium is 7 percent, T-bills are yielding 5 percent, and Titan Mining’s tax rate is 35 percent.
If Titan Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows?
A project that costs $5,350 to install will provide annual cash flows of $8 for each of the next 8 years. What is NPV if the discount rate is 11%?
An investor buys one call and holds it until expiration. What is the break even stock price at expiration?
Based on the problem definition and financial and accounting data the desired values are calculated for the case of Prospect Plc. organization and a detailed financial management and control analysis is given in the below sections.
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer, purchased just 2 years ago, is being depreciated on a straight-line basis and has 6 years of remaining life. Its curren..
A factory forecasts to produce the following cash flows: Year 1 - $6516, Year 2 - $7000, Year 3 - $11400, Year 4 onward in perpetuity - $12000. If the cost of capital is 6%, what is the factory's present value?
Assume the following information for a bank quoting on spot exchange rates. what should logically happen to the spot exchange rates?
Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech, Inc.; he has been impressed with the company’s computer products and believes that Hi-Tech is an innovative market player. However, Mike realizes th..
A mutual fund manager expects her portfolio to earn a rate of return of 10% this year. The beta of her portfolio is .9. Assume rate of return available on risk-free assets is 3% and you expect the rate of return on the market portfolio to be 13%. Cal..
Calculate the formula value of the right for both the rights-on and the ex-rights cases. How much is the market price of the company's stock expected to drop on the ex-rights date, all other things being equal? Why?
During the first six months that you hold the bond, prices in the United States rise by 2 percent. What is the new par value of the bond, and what is the amount of your first coupon payment?
Evaluate the August 165 puts and calls, and recommend a conversion or a reverse conversion. Determine the profit from the transaction if the options are held to expiration.
Ivan's, Inc. paid $498 in dividends and $594 in interest this past year. Common stock increased by $204 and retained earnings decreased by $130. What is the net income for the year? Suppose two firms are identical in all but their capital structure. ..
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