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Suppose a firm wants to raise $28 million dollars during the next year. The share price is currently $60 and it pays a $1 dividend. The firm has a higher debt ratio than other firms in its industry. The firm is generating $3.5 million/year in net income and the planned expansion is expected to generate additional net income of $3 million dollars/year. Additional revenue will be 0 in years 1 and 2 during set up and annual additional revnue may vary as much as 20R% from the estimate eachyear. The firm has the following options for financing the project:
1) Issue common stock directly to the public. There are currently 985,000 shares outstanding. The new share would be sold at $57/share, with $2 per share underwriting costs.
2) The firm could offer its current shareholders an opportunity to maintain their current proportionate ownership. They would issue rights to shareholders purchase these share at $48/share. Thef lotation costs of this offering would be approximatly $1/share.
3) The firm could issue a 10-year, 5.50% non-convertible subordinated debentures. These would be issued at par, with a 2% commission being paid to the investment banker for underwriting and distributing services. There would be a sinking fund requriement of $4.0 million per year, beginning in the 4th year.
Walter Industries has $4 billion in sales and $1.7 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity. What is Walter's target fixed assets/Sales ratio? What level of sales could Walter Industries have obt..
What are at least three International Accounting Standards? Are these standards the same as U.S. standards? Explain your response. Is it necessary to have global standards? Explain your responses.
Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. During the period, the Far East sales office generated 697 orders for a total of 6,020 i..
Starbucks partnered with Arizona State University (ASU) to offer a custom online undergraduate degree program for all Starbucks employees, at an affordable price. Is this a truly free college program, or are there risks and costs to the employees? If..
Syntex is considering an investment in one of two stocks. Given the information that follows, which investment is better, based on the risk (the standard deviation) and return?
Stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free ra..
If the cost of writing a payroll check is $1.50, what additional amount could be saved on an annual basis from switching to a monthly payroll period?
Perform an analysis of the social / demographic, technological, economic, environmental / geographic, and political/legal / governmental segments to understand the general environment facing Union Pacific.- Describe how Union Pacific will be affec..
Explain if the source of cash sustainable, and list any outstanding variances - Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements.
A project has the following cash flows: Year Cash Flow 0 $ 74,000 1 – 56,000 2 – 26,800 Requirement 1: What is the IRR for this project? What is the NPV of this project if the required return is 6 percent? What is the NPV of the project if the requir..
Sancore Inc. decided to invest in a project costing $35,000. It is assumed that all of $8,000 working capital will be recovered at the end of the project, which is four years. The opportunity cost of capital is 10%. Compute the present value of net n..
Two projects have the following expected net present values and standard deviations of net present values: Using the standard deviation criterion, which project is riskier? Using the coefficient of variation criterion, which project is riskier? Which..
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