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Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding and 220,000 ten percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.15, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 91 percent of par. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate is 32 percent. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.
1. what is a strategic alliance?2. do most strategic alliances succeed?3. what forms can strategic alliances take?4.
Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
An investment has a required return of 13 percent. The cash flows, in order, are -$42,000 (initial cost), $16,500 (year 1 CF), $28,400 (year 2 CF) and $7,500 (year 3 CF). Based on IRR, should this project be accepted?
A stock currently sells for $50. In six months, it will either rise to $55 or decline to $45. The risk-free interest rate is 6% per year. Find the value of a European call option with an exercise price of $50. Find the value of a European put option ..
When preparing a cash budget, once a firm has estimated its cash receipts the firm must. determine the desired cash balance. schedule disbursements. pay dividends to its stockholders.
You are purchasing a home for $200,000 with a 20% down payment. You will pay 6% interest, for a 15 year loan. How much is your payment for the home (insurance is $60 per month and taxes are $85 per month.) What is your principle, interest and balance..
The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed. Since mergers are frequently financed by debt rather than equ..
You are a young portfolio manager who has just been assigned a new portfolio. The current strategic asset allocation of the portfolio is 80% equity and 20% fixed income securities. The entire portfolio is invested in U.S securities only. What are the..
Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. The present value of the new project's annual cash flows (after tax) is: The net present value ..
Which variables in the current regression model are significant? And which are not significant? Justify your answer with p-values.
Suppose you decide to invest in corporate bonds. Accordingly, you visit a bond store. You see 3 bonds on the shelf. One is priced at $1,015.53, another is priced to sell at $1,300.00, and a third is selling at a discounted amount of $876.06. But you ..
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