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The Modigliani and Miller hypothesis does NOT work in the "real world" because: a) interest is tax deductible, providing an advantage to debt financing b) higher levels of debt increase the likelihood of bankruptcy, and bankruptcy has real costs for any corporation c) both a and b d) dividend payment are fixed and tax deductible for the corporation
The Black Bird Company plans an expansion. The expansion is to be financed by selling $87 million in new debt and $5 million in new common stock. The before-tax required rate of return on debt is 11.39% percent and the required rate of return on equi..
(Cost of preferred stock) The preferred stock of Gator Industries sells for $34.35 and pays $2.74 per year in dividends. What is the cost of preferred stock financing? The flotation costs adjusted initial outlay for issuing the preferred share are?
What is the value of a European call option if the underlying stock price is $81, the strike price is $90, the underlying stock volatility is 50 percent, and the risk-free rate is 3 percent? Assume the option has 60 days to expiration
Bennington Industrial Machines issued 154,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.4 percent. If the company has a $46.9 million market value of equity, what weight should it ..
A project has the following estimated data: price = $89 per unit; variable costs = $33.82 per unit; fixed costs = $5,100; required return = 10 percent; initial investment = $11,000; life = seven years. Ignore the effect of taxes. What is the financia..
Bredan Ltd has annual sales of $200 milion with a cost of goods sold of $150 million. They keep an average inventory of $60 millon. On average, the firm has accounts receivable of $50 million. If sales can be maintained at existing levels but invento..
To plant and harvest 20,000 bushels of corn, Farmer incurs fixed and variable costs totaling $33,000 at the time of the harvest. The current spot price of corn is $1.80 per bushel and the six-month interest rate is 4.0%. Farmer bought $1.70 strike pu..
When is it appropriate to use the firm's weighted average cost of capital (WACC) to evaluate a proposed investment and what would be the potential implications for Delta if WACC is used to evaluate the pet supply project?
Based on this...You are the marketing expert for a consulting firm hired to develop a marketing plan for a new tourist restaurant in Florida based on a magical fantasy-type theme (think Hogwarts from Harry Potter). The restaurant is similar to other ..
An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 17 years, while Bond S matures in 1 year. What will the value of the Bond S be if the going interest rate is 9%? Round you..
Your firm has an average collection period of 54 days. Current practice is to factor all receivables immediately at a 3 percent discount. Required: What is the effective cost of borrowing in this case? Assume that default is extremely unlikely. (Do n..
what are the components of gross national product gnp? how does it understate aggregate production in third world
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