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Suppose that Lil John Industries’ equity is currently selling for $40 per share and that 3.3 million shares are outstanding. The firm also has 63,000 bonds outstanding, which are selling at 102 percent of par. Assume Lil John was considering an active change to its capital structure so that the firm would have a (D/E) of 1.5.
1. Which type of security (stocks or bonds) would it need to sell to accomplish this?
2. How much would the firm have to sell?
What is the present value of this prize today at a 5% annual rate?
Jiminy’s Cricket Farm issued a 30-year, 6 percent semiannual bond 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. Suppose the book value of the debt issue is $50 million. In addition, the ..
What are the benefits and drawbacks of accumulating cash balances rather than paying dividends and what effects does dividend policy have on this type of decision?
Assume your costs of operation for the complex (upkeep, property taxes, employee wages, etc.) amount to $7,500 per month.
What price should the stock sell at if the discount rate is 20%. What price should the stock sell at if the discount rate is 15%.
Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 11 percent and the interest is paid semiannually. The yield to maturity on the bonds is 14 percent annual interest. ..
In what type of economic circumstances would a call feature be beneficial to a firm? In what ways does it increase risk for the bondholder?
Discuss in a sentence the relevance of historic and competitive benchmarking with respect to financial ratios.
Assume if interest rates suddenly fall by 1.2 percent instead, what would the percentage change in price of bond A and bond B?
Why do many trials of a simulation need to be run for accurate results?
Express the euro, the peso, and the yen rates in terms of the number of dollars required to buy one unit of each currency.
You are a business analyst with Kenmore Corporation. You have been asked to participate in an orientation program for newly hired managers in the corporation, and to outline and describe your role as a business analyst in the corporation. Describe th..
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