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A firm with a 40% tax rate has $10 million of preferred shares outstanding (each share has a $100par value) that pay a dividend of 10 percent and are callable at a premium of 6 percent. Issuing and underwriting expenses of $700,000 would have to be incurred.
(a) Assume that current dividend rates have dropped to 8 percent. What would be the market price of a preferred share (if it were non-redeemable/non-callable/non-retractable)?
(b) To what level would the dividend rate (on comparable issues) have to drop in order to make refinancing attractive?
(c) Assume that dividend yields have dropped to 8 percent. How many years will it take for the company to recoup the initial refinancing costs?
(d) Assume that the company chooses to call the 10% issue and refinance (with new shares)at 8%. What is the maximum number of new preferred shares (each new share has a $100par value) the firm can issue without increasing total annual dividend payments from their current level (at 10%)?
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Calculate the profit-maximizing price for the roverplus brand taking into account th effect of the sales of roverplus on sales of the royal dog food brand.
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ZR Corporation's stock has a beta coefficient equal to 0.8 and a required rate of return equal to 11 percent. If the expected return on the market is 12.5 percent, what is the risk-free rate of return, rRF?
Annual demand is 630 bags, fixed ordering costs are $9 per order, and the per-bag holding cost is estimated to be around $2 per year. What is the value of EOQ?
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Fourteen years ago, your parents set aside $7,500 to help fund your college education. Today, that fund is valued at $26,180. What rate of interest is being earned on this account?
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