Investing and weighted cost problems

Reference no: EM1329657

1.) A client is 20 years from retirement and desires to invest today for a $35,000 retirement annuity beginning one year following his retirement and continuing for 15 years in his retirement. The client requires an average 8 percent return over the entire term. What lump sum does the client need to invest today? What annuity amount?

2.) Find the marginal weighted average cost of capital given the following information:

(a) The firm has an outstanding zero-coupon bond issue with a remaining maturity of 10 years and a current price of $395.29 (in cents, not 32nds).

(b) The firm has an outstanding preferred stock issue, $100 par with a 10 percent dividend selling for $97.50. Flotation costs on a new issue are 8% of the price.

YR 1 $1.60
YR 2 $1.75
YR 3 $1.82
YR 4 $1.90
YR 5 $2.00

The growth of dividends over the last five years is expected to continue. Flotation costs on a new issue of common stock is 10 percent.

(d) The firm's combined state and federal income tax rate is 40 percent.

(e) The firm's target capital structure is 35 percent debt, 15 percent preferred stock, and 50 percent common equity. Common equity is from a new issue.

Reference no: EM1329657

Questions Cloud

How research contributed to the success of a business : Give a specific example of how research contributed to the success of a business.

What represent the length and width of a room in feet : build a Java class that declares variables to represent the length and width of a room in feet. Assign appropriate values to the variables. calculate and display the floor spae of th eroom in square feet (area = length * width). Display explnatory ..

Flourishing as there is a need for more people to do work : If the Inflation rate were to accelerate the economy would be flourishing as there is a need for more people to do the work.

A private exchange and a consortia based e-marketplace - ibm : Why do you think IBM needs both a private exchange and a consortia based e-marketplace?

Investing and weighted cost problems : A client is 20 years from retirement and wants to invest today for $35,000 retirement annuity beginning one year following his retirement and continuing for 15 years in his retirement. Find out the marginal weighted average cost of capital given fol..

Java application that indicates invalid ticket number entrie : Ticket numbers are designed so that if you drop last digit of the number, then divide the number by 7, the remainder of the division would be identical to the last dropped digit.

Explaining need theories of motivation : Analyze how the floor manager can help Roger using the need theories of motivation.

Create the class named pizza : build an application named TestPizza that instantiates on Pizza object and demonstrates the use of Pizza set and get methods. Save as TestPizza.java

Explain knowledge management : Explain Knowledge Management and What were the main forces that led to the commercialization of the Internet and How can Internet-based technologies be used to automate the supply chain

User Account

All Pages