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The balance sheet that follows indicates the capital structure for Nealon Inc. Flotation costs are (a) 15 percent of market value for a new bond issue, and (b) $2.01 per share for preferred stock. The dividends for common stock were $2.50 last year and are projected to have an annual growth rate of 6 percent. The firm is in a 34 percent tax bracket. What is the weighted average cost of capital if the firm's finances are in the following proportions?
Type of financing percentage of future financing
B. In part a we assumed that Nealon would have sufficient retained earnings such that it would not need to sell additional common stock to finance its new investments. Consider the situation now, when Nealon's retained earnings anticipated for the coming year are expected to fall short of the equity requirement of 47 percent of new capital raised. Consequently, the firm foresees the possibility that new common shares will have to be issued. To facilitate the sale of shares, Nealon's investment banker has advised management that they should expect a price discount of approximately 7 percent, or $2.45 per share. Under these terms, the new shares should provide net proceeds of about $32.55. What is Nealon's cost of equity capital when new shares are sold, and what is the weighted average cost of the added funds involved in the issuance of new shares?
Lakewood Fashions must decide how many lots of assorted ski wear to order for its three stores. Information on pricing, sales, and inventory costs has led to the following payoff table, in thousands.
penray uses a standard costing system in evaluating production operations. the company has had a number of problems
on february 1 2007 the caper manufacturing co. began construction of a building to be used as corporate offices. the
Evaluate the proposed change in credit standards and make a recommendation to the firm.
In a step acquisition, which of the following statements is false? A. Obtaining control through a step acquisition is a significant re-measurement event B. The acquisition method views a step acquisition essentially the same as a single step acquisit..
Our book distribution division sells to national bookstores. Our division allows for up to 25% of sales in returns. For the past 4 years, returns have averaged 20%. We record revenue based on revenue recognition when the right of return exists.
It is common for an entity to have transactions with related entities-some of which are fully owned, some of which share common ownership but are not otherwise related, and others wher ownership is small but there is control.
On January 1, 2010 (the date of grant), Lutz Corporation issues 2,150 shares of restricted stock to its executives. The fair value of these shares is $89,100, and their par value is $11,880.
Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.
the following events occurred during the first month of operations for xyz ltd. a company specialised in providing
the solution of this exercise 16-27 Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Company buys crude vegetable oil.
How much income must Terry recognize when she receives the stock dividend and how much gain or loss must Terry recognize when she sells the preferred stock?
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