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Hydra Multinational is a vast conglomerate firm involved in a wide array of business ventures ranging from satellite radio to cat food. One of its many divisions, a restaurant chain, is considering the value in trying to push its brand into a new geographical market and thus needs to estimate the appropriate cost of capital for this highly complex project. To help in your analysis, your junior analysts gathered some relevant data for you:Hydra has $11.3 billion in debt outstanding, a market capitalization of $26 billion, and its average tax rate is 34%. New bonds would have to be issued with a 6.74% coupon rate while there is sufficient retained earnings to pay for the expansion.The closest market competitor for the restaurant chain, Extra Chicken, has a beta of 1.8 with the broad market. Its most recent bond sale offered a 7.8% coupon rate and it also faces a 34% tax rate. Their D/E ratio is 0.63. The risk-free rate is estimated to be an average of 3.2% for the appropriate time horizon and the market risk premium is estimated to be 6.7% over the coming years.
You expect to receive $11,000 at graduation in two years. You plan on investing at 12 percent until you have $97,000. How long will you wait from now? (Do not round the intermediate calculations)? 17.21 years, 23.75 years, 23.33 years, 21.21 years..
Stocks coefficient of variation, required rate return and risk analysis - Calculate each stock's coefficient of variation. and Which stock is riskier for a diversified investor?
The Beasley Corporation has been experiencing declining earning, but has just announced a 50% salary increase for its top executives. A dissident group of stockholders wants to oust the existing board of directors.
What is Crypton's cost of capital where the firm's tax rate is 30%? Question= what is Crypton cost of capital ---% ?
The controller prefers Project S, but the CFO prefers Project L. How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS?
Some companies' debt-equity targets are expressed not as a debt ratio, but as a target debt rating on a firm's outstanding bonds. What are the pros and cons of setting a target rating, rather than a target ratio? Please explain both and provide ad..
What will be the value of these securities in one year if the required return declines to 8 percent?
Which of the following is an example of empire building?
A stock has a beta of 1.25 and an expected return of 14 percent. A risk-free asset currently earns 2.1 percent.
Computation of effective annual yield and bond value and What is the yield of the 5-year bond expressed as an effective annual yield?
Winston Clinic is evaluating a project that costs $52,125 and has expected net cash flows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent.
Lola's Ice Cream recently arranged for a line of credit with Longhorn State Bank of Dallas. The terms of contract called for a $100,000 maximum loan with interest set at 2% over prime.
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