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Isabella Construction and Interior Design is an all-equity company in Central Michigan. The CFO John Thornton Jr. is considering moving to a capital structure with 25% debt and 75% equity and using the all the newly raised capital to repurchase shares of the common stock. The firm's tax rate is 22%, its current beta is 1.40, and it has 25,000 shares of common stock with a market price of $312 per share. Assume MM propositions hold. a. How many shares of common stock will remain after the repurchase? b. If the risk-free rate is 3.5% and the market risk premium is 8.0%, by how much would the cost of equity for the levered firm increase, compared to the cost of equity of the unlevered firm? c. What will be the change in the WACC, if the company can borrow at 7.25 percent?
A firm paid a dividend of $1.52 a share this year and had earnings per share of $5.42. Its market price per share is $69.10. What is its dividend yield?
question adelsons electric had beginning long-term debt of 42511 and ending long-term debt of 48919. the beginning and
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Imagine that you buy a house as a rental property. The cost of buying the house was $350,000, of which $75,000 is the value of the land. Approximately how much can be used as a federal income tax deduction per year for depreciation?
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Stock X has a required return of 12%, a dividend yield of 5%, and its dividend will incease at a constant rate forever. Stock Y has a required return of 10%, a dividend yield of 3%,
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Assume that all cash flows occur at end of year. SGPs pre-merger beta is 2.0 and its post-merger tax rate would be 34 percent. What is the value of SGP to Brau.
If the price of the common stock into which the bond is convertible rises to $30 per share after 5 years and the issuer calls the bonds at $1,080, should Annie let the bond be called away from her or should she convert it into common stock?
volcan real estate company was founded 25 years ago by the current ceo john volcan. the company purchases real estate
portfolio theory please respond to the followingevaluate the capm and the apt in terms of accuracy and determine the
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