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Jumbo Juice’s preferred stock pays a constant dividend equal to $4.75 per share. The firm’s marginal tax rate is 40 percent. Jumbo Juice incurs a 5 percent flotation cost each time it issues preferred stock. (a) If the firm issues 10,000 shares of preferred stock at $50 per share, how much of the total value of the issue will the firm be able to use (receive)? (b) What is Jumbo Juice’s cost of preferred stock?
Harrison Clothiers' stock currently sells for $31 a share. It just paid a dividend of $1.5 a share (that is, D0 = 1.5). The dividend is expected to grow at a constant rate of 4% a year. Hart Enterprises recently paid a dividend, D0, of $2.75. It expe..
Dan is considering the purchase of Super Technology, Inc. bonds that were issued 3 years ago. When the bonds were originally sold they had a 27-year maturity and a 6.27 percent coupon interest rate, paid annually. The bond is currently selling for $1..
Hickock Mining is evaluating when to open a gold mine. The mine has 39,000 ounces of gold left that can be mined, and mining operations will produce 6,500 ounces per year. The required return on the gold mine is 10 percent, and it will cost $34.5 mil..
Dan and Mary Green are in their mid-30s and have two children, ages 8 and 5. They have combined annual income of $95,000 and own a house in joint tenancy with a market value of $310,000, on which they have a mortgage of $250,000. As their ?nancial pl..
For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per year, compounded annually and is expected to continue paying that amount. Mary will make one more $500 deposit one year from today. If Mary closes t..
Dharma Supply has earnings before interest and taxes (EBIT) of $568,000, interest expenses of $299,000 and faces a corporate tax rate of 34 percent. a. What is Dharma Supply's Net Income? b. What would Dharmas net income be if it didn’t have any debt..
Proficient-level: "Year-to-date, Oracle had earned a −1.34 percent return. During the same time period, Valero Energy earned 7.96 percent and McDonald's earned 0.88 percent. If you have a portfolio made up of 30 percent Oracle, 25 percent Valero Ener..
A firm is financed with twice as much debt as equity, incurs a 7% cost of debt, 16.5% cost of equity, and a 34% tax rate. What is the required return on assets?
A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g =-5%). If the company is in equilibrium and its expected and required rate of return is 15%, which of the..
Calculate the Internal Rate of Return (IRR) for an investment in a 400-MW power plant with an expected life of 30 years. This plant costs 1200 $/kW to build and has a heat rate of 9800 Btu/kWh. It burns a fuel that costs 1.10 $/MBtu.
Find the internal rate of return for the following series of cash flows. The initial outlay is $670,560.
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,100. What will the cash f..
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