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Macklemore Enterprises would like to go public to raise $10 million to support expected growth in Thrift Shops. Their investment bank charges the following: 5% underwriting spread for a firm commitment $347,262 in legal fees If 0.6 million shares will be issued to cover the proceeds it needs to fund its future investment, at what price should the IPO be set? (Hint: The offer price must be sufficient to cover the required net proceeds plus all fees and the underwriter's spread. Use this to solve for IPO price.)
Williamson, Inc., has a debt–equity ratio of 2.45. The company's weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. The corporate tax rate is 35 percent. What is the company's cost of equity capital? What is the..
Would the United States gain from the combination of the export subsidy and import tariff? Would Canada? Explain.
What is the yield to maturity on a Treasury STRIPS with 7 years to maturity and a quoted price of 77.859? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
ABC Corp. issued a 12 percent, 20 year coupon rate bond 5 years ago. Interest rates are now 8 percent. The par value of the bond is $1,000. Based on semi-annual analysis, what is the current price of the bond?
Company A needs new equipment for a project and is deciding whether it makes more sense to lease or buy. The firm's tax rate is 40% and this project will last 5 years. The equipment will be able to be sold at the end of 5 years for $475,000. Calculat..
On Juan’s 26th birthday, he deposited $8,500 in a retirement account. Each year thereafter, he deposited $1,000 more than the previous year. Using a gradient series factor, determine how much was in the account immediately after his 35th deposit if: ..
The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the bond?
Bennington Industrial Machines issued 142,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.2 percent. Interest rates have recently increased, and the bonds now have a yield to maturity..
Explain with examples how the cost of capital is determined. Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand. Explain why rapid growth plans are import..
Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits. Do most managers of publicly traded companies adhere to th..
Suppose you have a $1,000 face value bond with 12 years to maturity, a coupon rate of 6% and a yield to maturity of 8%. If the bond makes semiannual payments, what is its price today? Compute the value of Acme Common Stock if the next dividend is exp..
Waller Co. (WAG) paid a $0.140 dividend per share in 2006, which grew to $0.295 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 14.0 percent?
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