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MM Corp. has 50,000 shares outstanding with share price of $18. It has debt with market value of $300,000. The equity beta is 1.2 and debt beta is 0.1. The risk-free rate is 2% and the market risk premium is 6%. There are no corporate taxes. The firmmakes a surprise announcement to issue additional shares for $100,000 and use the proceeds to buy back debt. Assume that the risk and the market value of the debt are unaffected bythe announcement. What will be the new cost of equity after the recapitalization? Does it increase, decrease, or remain unchanged after recapitalization? Why?
Suppose 15 %of all balls produced by a particular manufacturer are less than 1.680 inches in diameter, and assume that the number of such balls, x, in a sample of fourfourdozen balls can be adequately characterized by a binomial probability distri..
Williams Oil Company had a return on stockholders’ equity of 18 percent during 2010. Its total asset turnover was 1.0 times, and its equity multiplier was 2.0 times. Calculate the company’s net profit margin.
If this is the policy, and Gamma wants to hedge its risk with options, what exotic options would you recommend. What would be the price of these options
What are some benefits of international capital markets? does borrowing the portfolio of currencies offer any possible advantages over borrowing of single foreign currency?
What capital budgeting model are we using, and what decision is recommended from that model?
You run a regression of monthly returns of Mapco Inc, an oil and gas producing firm, on the S&P 500 index and come up with the following output for the period.
The expected growth rate is 7 percent, and the required rate of return is 9.5 precent based on the cost of capital. Calculate the current price of the stock. Do not use a financial calculator or an online calculator. You must show your work.
What benefit did the Venezuelan regime in power gain from the repeated devaluation of the Bolivar?
Ledya focuses on her main idea the danger of a single story. What should i put after idea simicolon or colon?
Stanley Furniture produces two types of china cabinets, First Provincial and Deluxe Modern. Each cabinet goes through three departments: carpentry, painting and finishing.
Analyze the concept of team learning as described by senge(2016) and compare and contrast these ideas of senge(2016j with those of others.
What are the NPV and IRR rules and how are they used in capital budgeting decisions. Use quantitative examples in your answer.
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