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Penelope's Flower shop, Inc. is looking to raise $25 million to finance firm expansion. When discussing the matter with it's investment bank, the firm finds out that the bankers recommend a gross proceeds price of $35 per share, and they'll charge an underwriters spread of 5.6 percent of the gross price. Calculate the net proceeds price to Penelope's from the sale of the stock.. How many shares of the stock will the company have sell to recieve the $25 million it needs?
Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $982,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. What is ..
Rezek Razors issued a bond 5 years ago with a 5% coupon and a par value of $310 million. The bond currently yields 6% and trades at 105% of par. The company also issued a bond 3 years ago with a 6% coupon and a par value of $120 million. The bond cur..
CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Market Portfolio is 9.10%, the Risk-Free Rate is 2.0%, and the Beta for Stock i is 0.9. Find the Expected Return on the Stock using the ..
For each of the following coverages briefly describe the type of coverage provided and give an example of a loss that would be covered.
An unlevered firm has a value of $700 million. An otherwise identical but levered firm has $130 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax r..
A New Business Venture must develop a comprehensive business plan to borrow money to get started. companies such as FedEx, Nike, and Rolm Corporation say they did not follow the original plan cosely. Does that mean that developing the plan was a wast..
You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 7.5 percent APR for this 360-month loan, with interest compounded monthly. What will be the amount of the balloon payment if you a..
Firm X has a tax rate of 25%. The price of its new preferred stock is $70 and its flotation cost is $4.00. The cost of new preferred stock is 12%. What is the firm's dividend?
Short Corp just issued bonds that will mature in 10 years, and Long Corp issued bonds that will mature in 20 years. Both bonds promise to pay a semiannual coupon, they are not callable or convertible, and they are equally liquid. Further assume that ..
The real risk-free rate is 3%. Inflation is expected to be 3% this year, 4% next year, and 3.5% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1), where t= number of years to maturity. What is the yield on a 7-year Treasury note?
ELC Electrical Services is considering the construction of a plant to manufacture a new energy saving device for small offices. The company recently commissioned a $100,000, two-year study to assess the market demand for the proposed product.
Suppose that you are the president of a small commericial bank, Explain why this loan may potentially get your bank in to difficulty.
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