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The lower risk nature of long−term debt in a? firm's capital structure is due to the fact that?
A. creditors have a higher position in the priority of claims.
B. dividend payments are taxminus−deductible.
C. equity capital has a fixed return.
D. the equity holders are the true owners of the firm
Suppose Paccar’s current stock price is $108.26 and it is likely to pay a $3.06 dividend next year. Since analysts estimate Paccar will have an 5.6 percent growth rate, what is its required return?
Suppose you receive 2,500,000 British Pounds (not Euros) today and plan to convert into US dollars early next February. Which is the correct action to take today in order to hedge against GBP exchange rate risk?
A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. How is this possible? Does this violate our basic principle of stock valuation? Explain.
(Common stock valuation) The common stock of NCP paid $1.21 in dividends last year. Dividends are expected to grow at an annual rate of 5.40 percent for an indefinite number of years. If your required rate of return is 8.30 percent, what is the value..
Jeremy has a 25 year mortgage for $165, 000 at 4.02% annual interest compounded monthly: What are the monthly payments on the loan? What is the unpaid balance on the loan after 6 years? After 6 years Jeremy is able to refinance the remaining balance ..
Calculate the required rate of return for Mercury? Inc., assuming that the risk free rate of return is? 5%, the expected market return is 11? percent, Mercury has a beta of? 2.0, and? Mercury's realized rate of return has averaged 14 percent over the..
Petra has forgotten the rate of simple interest she earned on a 120-day term deposit at Scotiabank. At the end of the 120 days, she received interest of $327.85 on her $20,000 deposit. What rate of simple interest was her deposit earning?
You are given the following information for Huntington Power Co. Assume the company’s tax rate is 40 percent. Debt: 7,000 6.2 percent coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 105 percent of par; the bonds make sem..
Your coin collection contains 44 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2054, assuming they appreciate at an annual rate of 5.7 perce..
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $88, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate..
Discuss how “earnings quality issues” would be identified (in other words, which financial statements and other Company disclosures would be reviewed to identify earnings quality issues).
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 6%, and (5) variance of stock ret..
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