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The cost of debt capital for a firm _____________.
a. is equal to the current yield (not YTM) on the firm’s outstanding bonds
b. can be calculated by estimating the beta of the firm’s equity and then using the SML
c. can be calculated by looking at the coupon rates on existing bonds of similar risk
d. can be estimated even if the firm’s bonds are not publicly traded, by looking at the yield to maturity on bonds outstanding from peer group firms with similar ratings and maturity.
Forbidden Fruit Extracts expects its earnings before interest and taxes to be $325,000 a year forever. Currently, the firm has no debt. The cost of equity is 16.3 percent and the tax rate is 35 percent. The company is in the process of issuing $2 mil..
You have $14,600 on deposit with no outstanding checks or uncleared deposits. Assume you deposit a check for $6,200. Does this create a disbursement float or a collection float? What is your available balance? What is your book balance?
An optimization model, suitable for the selection of suppliers of a single commodity, can be defined if the following data are available.- Formulate the supplier selection model.
The board, which is concerned about this, asks for an explanatory memorandum, again, for the next board meeting, summarising the main provisions of the relevant legislation and setting out procedures which the company should adopt to ensure that t..
How can investors reduce the risk associated with an investment portfolio without having to accept a lower expected return?
A $1,700 face value corporate bond with a 5.6 percent coupon (paid semiannually) has 12 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.9 percent. The firm has recently gotten into some trouble and the rating ag..
q1. circle the right statementa. in the statement of cash flows a reduce in inventories is reported as a use of cash.
Calculate the arithmetic mean HPR, the standard deviation of the HPRs, and the geometric mean for each fund. Which fund contained more risk per unit of return?
You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 9,000 of these per year for 10 years (after which time this project is expected to shut down with sol..
Suppose the interest rate for a 1-year Treasury bond is 10% and a 1-year BB-rated corporate bond is 15.8%. What is the probability of default as perceived by the market?
Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project ..
You have decided that Greenville needs a new lounge to appeal to the older crowd. It will feature live blues musicians, appetizers, and a well-stocked bar. You are trying to decide whether you should invest in this venture. Prepare a capital budgetin..
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