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A firm has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. The 10 percent semiannual bonds are selling at 91 percent of par/face value. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 6.75 percent, T-bills are yielding 3.5 percent, and the firm's tax rate is 32 percent.
1. What is the firms cost of Equity? by using CAPM
2. What is the firm’s cost of Debt? by using a calculator
3. What are the proportions of Debt and Equity in the Capital Structure?
4. What is the firm’s WACC ?
If a dump truck for hauling coal has an estimated net cost of $ 87,000 and is expected to give service for 200,000 miles, resulting in a salvage value of $9,000, what would be the depreciation per mile. Compute the allowed depreciation amount for the..
What is the no-arbitrage two-year forward exchange rate (expressed in U.S. dollars)?
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. What will the cash flows for this project be?
Smith Inc. reported sales revenue of $4,600,000 in its income statement for the year ended December 31, 2015. Additional information is as follows: 12/31/14 12/31/15 Accounts receivable $1,000,000 $1,300,000 Allowance for uncollectible accounts (60,0..
All secondary markets are broker markets. All stock transactions are secondary market transactions. All Dutch auction sales are secondary market transactions. All stock trades between existing shareholders are secondary market transactions.
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $11 per share dividend in 10 years and will..
Marichal Motors is considering an investment in a proposed project. Rather than making the investment today, the company wants to wait a year to collect additional information about the project. What is the expected NPV (in today's dollars) if the co..
Suppose your firm is considering investing in a project with the cash flows shown below,
Why is the variance of a portfolio of internationally diversified stocks likely to be lower than the variance of a portfolio of U.S. stocks?
What is the addition to retained earnings?
Complete the statement of sources and uses of cash from the following entries:
Find the value today in USD of a 1-period at-the-money call option on YEN 300,000. The spot exchange rate is YEN 100 / USD. In the next period, the YEN can increase by 15 percent or decrease by 15percent. The risk free rate in USD is 5 percent. Th..
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