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Erna Corp. has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a coupon rate of 8 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, has a coupon rate of 9 percent, and sells for 107 percent of par. The first issue matures in 23 years, the second in 7 years.
Suppose the most recent dividend was $4.50 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 30 percent. What is the company’s WACC? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Accents Associates sells only one product, with a current selling price of $200 per unit. Variable costs are 20% of this selling price, and fixed costs are $50,000 per month. Management has decided to reduce the selling price to $195 per unit in an e..
Big Dom’s Pawn Shop charges an interest rate of 27.6 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What is the effective annual rate?
What is the target debt-equity ratio if the targeted cost of equity (Rs) is 23.64%? Assume no taxes.
Consider two firms A and B that are identical in all respects except capital structure. Firm A has $160 million in equity outstanding and $40 million in bonds outstanding. Firm B has $200 million in equity outstanding and $0 million in bonds outstand..
United Artist Inc. a Maryland corporation, sponsored a defined benefit pension plan administered by United Pension Plan.
A trader has a put option contract to sell 100 shares of a stock for a strike price of $650. What is the effect on the terms of the contract of:
He rents the trucks on an asneeded basis about twice per week. If his tax rate is 8%, then what is his after tax lease payment?
You opened an individual retirement account (IRA) on April 14, 2005 with, a deposit of $2,000.
Give an example of External Credit Enhancement on an ABS.
A firm is expected to pay a dividend of $2.35 next year and $2.65 the following year. Financial analysts believe the stock will be at their price target of $105 in two years. Compute the value of this stock with a required return of 11.3 percent.
However, if the new battery is added, then Class A sales are expected to decline to 225 unit while the Class C sales are expected to decline to 200.
KADS, Inc., has spent $370,000 on research to develop a new computer game. The firm is planning to spend $170,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; What will the ..
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