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In calculating the WACC, it's most appropriate to use:
the target structure because it's in some sense the best.
market values for structure and target values for costs because they're the most practical.
book values for structure and component costs because these reflect the actual existing capital structure and what the firm really pays for the capital it has.
market values for structure and component costs because the best reflect next year's capital costs which will be encountered when money is raised for future projects.
In early 1990, Boeing Co. decided to gamble $4 billion to build a new long-distance, 350-seat wide-body airplane called the Boeing 777. The price tag for the 777, scheduled for delivery beginning in 1995, is about $120 million apiece. what is the bre..
A Treasury bond with the longest maturity (30 years) has an ask price quoted at 98:09. The coupon rate is 3.80 percent, paid semi-annually. What is the yield to maturity of this bond?
"Explain how the Net Present Value (NPV) and Internal Rate of Return (IRR) analyses work and how they can be used to make financial investment decisions. Provide an example of the NPV analysis.
Reagan Corp. has reported a net income of $836,200 for the year. The company's share price is $13.03, and the company has 307,810 shares outstanding. Compute the firm's price-earnings ratio.
An investment offers a total return of 14 percent over the coming year. Bill Bernanke thinks the total real return on this investment will be only 8.6 percent.
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..
We are evaluating a project that costs $744,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 45,000 units per year. Calculate the best-case and ..
You have a portfolio with a beta of 1.77. What will be the new portfolio beta if you keep 82 percent of your money in the old portfolio and 18 percent in a stock with a beta of 0.93?
Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $0.39 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs ..
Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20. The market has a risk free rate of 3.1% and market return 11.1%. What’s the discount rate using CAPM? Ca..
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.85. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and to u..
A few years ago Spider web inc issued with a 11.79 percent annual coupon rate paid semiannually. The bonds have a par value of $1,000 a current price of $702 and will mature in 23 years. What would the annual yield to maturity be on the bonds if you ..
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