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Steve and Styles (S&S) are constructing its Marginal Cost of Capital (MCC) schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. S&S bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. S&S could sell, at par, $100preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Steve growth firm which just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8 percent. The S&S’s policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find ks. The S&S's net income is expected to be $1 million, and its dividend payout ratio is 40 percent.
What is S&S cost of preferred stock?
What do you think about MCC?
Explain how Level 1, Level 2, and Level 3 assets differ. Which asset type is the riskiest? Explain why.
Suppose a piece of land is available for purchase in a prime location to place a Verizon Wireless Store. If the store will be successful it will be worth $5 million in present value, if not it will be worth -$6 million for an overall NPV of -$1 milli..
Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of t..
What stakeholders benefit from reviewing profitability ratios for a company? Identify at least three stakeholder groups, and give an example of how each might use profitability ratios.
In addition, you may wish to seek out further information through your own research. When you have reviewed the advice and the plans, please prepare a short (2-3 page) paper discussing:
Thompson Industries has a project with the following projected cash flows:
The authorized share capital of the Alfred Cake Company is 110,000 shares. The equity is currently shown in the company’s books as follows: Common stock ($2 par value) $ 73,000 Additional paid-in capital 23,000 Retained earnings 43,000 Common equity ..
Optimal policy mix Assume that Atlas Sporting Goods, Inc., has $800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan the return will be 12 percent. If the firm goes..
1. The Los Angeles Lakers are sold for 650 Million. At a tax rate of 25% what is the new owner's yearly tax savings if he uses straight line depreciation of the purchase price over the full 15 years allowed by the IRS?
Suppose Japanese yen money market annual rate is .60 % and US money market an annual rate of 4.50 %. The predictions on the spot rate in 6 months made by financial analysts X and Y are Yen116/$ and Yen 114/$ respectively. If the sport rate today is Y..
Your company has a new project to be considered. You are given the following information on the best guess of related outcomes for the project. The cost of developing and market testing the product over the next year is $225 million. Determine the ne..
The TMM Corporation has just announced a rights offering where it will take four rights to buy an additional share of common stock at $50 a share. If the current market price is $60 a share, what would be the theoretical market price per share once t..
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