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Southern Alliance Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common stock, 15 percent preferred stock, and 25 percent debt. Flotation costs for issuing new common stock are 12 percent, for new preferred stock, 9 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project?
Ash has a large and growing collection animated movies she wants to replace her old television with a new LCD model so she is started saving for it at the end of each year she deposits $920 in her bank account which pays her 9% interest annually Ash ..
All interest rates are quoted with annual compounding. The current exchange rate is 1.8500. What is the value of the swap to the party paying sterling? What is the value of the swap to the party paying dollars?
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.50 coming 3 years from today. If the ..
Your division is considering 2 investment projects, each of require up-front expenditure of $15 million. a. what are the 3 projects NVP assuming the cost of capital is 5%, 10%, 15% b. What are the 2 projects IRR at these same costs of capital?
A put option on 100 shares of Generous Dynamics stock has an exercise price $115.0 per share. GD declares 4.0-for-1 stock split. What happens to the exercise price and the number of shares underlying the option?
Suppose that you borrow $1,000 and the loan is to be repaid in three equal, end of year payments (an ordinary annuity). The interest rate on the loan is 6%. How of the second payment goes to paying interest?
Suppose that an investor is planning to purchase a 9% coupon bond selling at par with 4 years to maturity and plans to hold it for 4 years. The investor expects that he can reinvest the coupon payments at an annual interest rate of 8.4%. What is the ..
Suppose Walmart issues a bond with a par value of $1,000 10 years to maturity and a coupon rate of 5% paid annually. If the yield to maturity is 6%, what is the current price of the bond?
A small business owner visits his bank to ask for a loan. The owner states that he can repay a loan at $3,500 per month for the next three years and then $2,500 per month for two years after that. If the bank is charging customers 11.00 percent APR, ..
Percy Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 12%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 13.30%...
Ezzell Enterprises' noncallable bonds currently sell for $939.00. They have a 5-year maturity, semi-annual coupon rate of 12.00%, and a par value of $1000. What is the bond's capital gain or loss yield?
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding. What are the forward price and the initial value of the f..
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