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Moji Mont Company has a debt–equity ratio of .25. The required return on the company’s unlevered equity is 15 percent, and the pretax cost of the firm’s debt is 8.0 percent. Sales revenue for the company is expected to remain stable indefinitely at last year’s level of $18,500,000. Variable costs amount to 70 percent of sales. The tax rate is 34 percent, and the company distributes all its earnings as dividends at the end of each year.
If the company were financed entirely by equity, how much would it be worth? (The answer is in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Compute the yield to maturity of a $2,500 par value bond with a coupon rate of 7.5% (quarterly payments that is, four times per year) that matures in 25 years. The bond is currently selling for $3,265.rounded to one decimal place.
QwikShare is a new not-for-profit organization that will rent low-emissions automobiles at QwikStops in suburban areas in order to provide an environmentally friendly transportation option to its customers.
Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculation..
Fooling Company has a 14 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $100. What is the yield to call (YTC) for this bond if the current price is 104 percent o..
An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. If the real risk-free rate is 4.91% and in..
You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $50,000 today or receive payments of $641 a month for ten years. You c..
Assume the risk free rate is 6% and the market risk premium is 7.5%. Ragnarok Unlimited Corp. (RUC) has a beta of 4, and it offers a return of 27% at the moment. Is RUC fairly priced according to the CAPM? Why or why not? If the price is not fair, wh..
Do convertible securities aggravate or ease potential conflicts between bondholders and shareholders?
You deposit $2,500 today in a retirement account at 6% interest compounded annually. How much more money will you have if you leave it in a for 35 years rather than 25 years?
Present and critically comment on the following risk-adjusted measures of hedge fund performance
Suppose you invest $ 4,030 today to start a business. In 6 years you hope to sell this company for $ 14,849. What would be your annualized rate of return?
To expand his portolio, Jorge recently purchased 275 shares of common stock in the Wellington Industries. The current market price of Wellington's common stock is $22.25 per share. Jorge's total wealth from his investment in Wellington Industries is:..
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