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Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $50, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $69.4 million and a coupon rate of 6.7 percent and sells for 108.6 percent of par. The second issue has a face value of $59.4 million and a coupon rate of 7.2 percent and sells for 108.3 percent of par. The first issue matures in 9 years, the second in 26 years. Suppose the company’s stock has a beta of 1.3. The risk-free rate is 2.8 percent, and the market risk premium is 6.7 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 40 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
What is meant by the term momentum? - Sketch a graph of this stock's price and comment on how the curve's shape is impacted by momentum.
GT Motors regularly issues short-term debt to finance its daily operations. Suddenly, the credit markets froze and no funds were available for borrowing. Fortunately, the firm had some cash reserves saved that it was able to use to fund its operation..
Suppose a stock had an initial price of $77 per share, paid a dividend of $1.3 per share during the year, and had an ending share price of $83. Compute the percentage total return.
Its pretax cost of equity is 14 percent, and its pretax cost of debt is 8 percent. The tax rate is 40 percent. What is the NPV of this project?
Give an example each of a situation where you would prefer a futures contract over or forward contract and conversely when you would prefer a forward contract over futures contract for hedging purposes. Give reasons.
Stock returns and your retirement account: Suppose your retirement account has a balance today of $25,000 and you are 20 years old. If you are invested in a diversified portfolio of stocks, you might hope that the historical return of about 6% contin..
Green Devil Corporation stock, of which you own 100 shares, will pay a $3 per share dividend one year from today. Two years from now Green Devil will close its doors and stockholders will receive a liquidating dividend of $12 per share. The required ..
Four months ago, you purchased 1,200 shares of LBM stock for $9.30 a share. Last month you received a dividend payment of $.065 a share. Today, you sold the shares for $8.62 a share. What is your total dollar return on this investment?
Obesity is perceived to be a national health problem in the United States. One suggestion to deal with this problem is a “fat tax.” The idea is to levy a tax on foods containing more than a government prescribed percentage of the daily minimal fat in..
Twenty years ago JeffCo Inc. issued thirtyminus−year ?9% annual coupon bonds with a? $1,000 face value each. Since? then, interest rates in general have risen and the yield to maturity on the? firm's bonds is now? 11%. Given this? information, what i..
The debentures are callable two years from now at $1,090. If you require a 20 percent rate of return on investments of this perceived risk level, should you buy these debentures?
The common stock of Mill Stones has a beta that is 8 percent greater than the overall market beta. Currently, the market risk premium is 7.65 percent while the U.S. Treasury bill is yielding 4.3 percent. What is the cost of equity for this firm?
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