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?(Individual or component costs of capital?) Compute the costs for the following sources of? financing : (round to two decimals)
a. A$ 1000 par value bond with a market price of $ 945 and a coupon interest rate of 9 percent. Flotation costs for a new issue would be approximately 5 percent. The bonds mature in 8 years and the corporate tax rate is 35 percent.
b. A preferred stock selling for $ 109 with an annual dividend payment of $ 8 The flotation cost will be $ 7 per share. The? company's marginal tax rate is 30 percent.
c. Retained earnings totaling $ 4.8 million. The price of the common stock is $ 76 per? share, and dividend per share was $ 9.87 last year. The dividend is not expected to change in the future.
d. New common stock for which the most recent dividend was $ 3.07.The? company's dividends per share should continue to increase at a growth rate of 8 percent into the indefinite future. The market price of the stock is currently $ 64; however, flotation costs of $7 per share are expected if the new stock is issued.
Expectations theory one year treasury securities yield 4.85%. calculate the yield using a geometric average.
Annualized interest rates in the U.S. and France on January 1, 1991 are 9% and 13%, respectively. The spot value of the franc is 0.1109 per dollar. What is the expected exchange rate (franc/$) in one year? At what one-year forward rate will covered i..
What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent?
The reinvestment approach to the modified internal rate of return:
The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise funds as additional notes payable and use them to increase inventory. What will be the firm’s quick ra..
Which one of these statements is incorrect? Real cash flows must be discounted at a real discount rate. (1 + real rate of interest) = (1 + nominal rate of interest)/(1 + inflation rate) The actual real rate of interest almost equals "nominal rate of ..
Discuss the following statement. All else equal, firms with relatively stable sales are able to carry relatively high debt ratios. Is the statement true or false? Why? Explain.
Suppose it is currently December. The January futures price is $50 and the March futures price is $52. What does the spread of $2 represent? the cost of carry from December to January the expected risk premium from December to March the cost of carry..
Which of the following measures would increase the duration of a bond issue? Periods of a negatively sloped yield curve have also been times of.
One advantage of leasing voiced in the past is that leasing kept liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than it otherwise could have. This raised the question of whether or not both the lease obl..
A project has an initial cost of $68,300 and cash flows of $38,700, $102,300, and -$18,100 for Years 1 to 3, respectively. If the required rate of return for this investment is 8.7 percent, should you accept it based solely on the internal rate of re..
Home bias has a potential information-based explanation. Explain.
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