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Southern Alliance Company needs to raise $60 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 7 percent, and for new debt, 3 percent. What is the true initial cost figure Southern should use when evaluating its project? (Enter your answer in dollars, not millions of dollars (e.g. 1,234,567). Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.) Initial cost $
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table
What signals does the initiation and continuance of the dividend payments make to the market?
Disinfection may cause:
Locate the treasury issue in Figure 6.3 maturing in February 2037. Is this a premium or a discount bond? What is its current yield? What is its yield maturity? What is the bid-ask spread for a $1000 par value bond?
What is the difference in the annual payments between the two bases for interest? Which method requires more money to repay the loan?
Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. What is the company’s current actual beta? What is the ca..
A proposed project has fixed costs of $96,000 per year. The operating cash flow at 6,600 units is $96,200. Ignoring the effect of taxes, what is the degree of operating leverage? If units sold rise from 6,600 to 7,100, what will be the new operating ..
A firm has decided to replace a major piece of industrial equipment. The equipment costs $690,000 to purchase and install and is expected to have a useful life of 5 years, after which it will be sold on the open market and is expected to have a salva..
Down Under Boomerang, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $4,200,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it wi..
what is the dividend growth rate?
Lyman Nursuries purchased seeds costing $25,000 with terms of 3/15 net 30 EOM on January 12. How much will the firm pay if it takes the cash discount? What is the approximate cost of giving up the cash discount, the simplified formula?
Wayne-Martin Electric Inc. had an outstanding performance for the year 2009 as their solar panel sales exceeded all the competitor’s sales due to their capability of generating 200% more electricity than any other solar panel currently on the market...
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