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FarCry Industries, a maker of telecommunications equipment, has 3 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $28 per share, the preferred shares sell for $15.00 per share, and the bonds sell for 98 percent of par.
What weight should you use for preferred stock in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)
Weight used %
A corporation is going to have to pay a debt of $1,200,000 after one year, a debt of $1,500,000 after 2 years and $2,000,000 after 3 years. In order to set up an absolute matching strategy to pay these debts, the corporation may purchase: The spot ra..
Builtrites common stock is currently selling for $48 a share and the firm just paid an annual dividend of $2.30 per share. Management believes that dividends and earnings should grow at 8% annually. Since new stock would need to be sold to finance an..
Best Window & Door Corporation is considering the acquisition of Glassmakers Inc. Glassmakers has a capital structure consisting of $5 million (market value) of 11% bonds and $10 million (market value) of common stock. What discount rate should you u..
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What is the capital allocation problem? According to the efficient diversification, what should be the optimal solution to the capital allocation problem?
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You have $10,000 to invest. You decide to invest $20,000 in Google and short sell $10,000 worth of Yahoo! Google's expected return is 15% with a volatility of 30% and Yahoo!'s expected return is 12% with a volatility of 25%. The stocks have a correla..
Fido's Dog Spa financial statements show that its total assets equal $100,000, its return on assets (ROA) is 3 percent, and its return on equity (ROE) is 5 percent. (a) Compute the company net income. (b) What portion of total assets is financed with..
Restrictions on dividend payments based on the liquidity postion of the firm. Based on your understanding of constraints on dividend payments, identify the type of constraint this condition represents. Assume that all other factors held constant. IN ..
How would increasing loan loss reserves reduce the risk of bankruptcy for a smaller bank?- If a bank increases its loan loss reserves, will it have less money available to lend?
Input area: Settlement date 10/30/05 Maturity date 10/30/15 Coupon rate 9% Coupons per year 2 Face value $1,000 Yield to maturity 6%. Find Price. Find discount or premium?
Define the terms finance and financial management. What are the major sub-areas of finance? Identify and define the three basic forms of business ownership. Describe the advantages and disadvantages of each
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