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Total market value of a company $60million. During the year, company plans to invest $30mil in new projects. based on the firm's present market value capital structure (Debt $30mil, Common Equity $30mil) which is considered optimal. No short term debt. New bonds will have 6% coupon rate, sold at par. Common stock is currently selling at $30/share. Stockholder's required rate of return is 12% consisting of a dividend yield of 4% and and expected constant growth rate of 8%; next expected div is $1.20 so $1.20/$30=4%. Marginal Corporate Tax rate 30%.
In order to maintain present capital structure, how much of the new investment must be financed by common equity.
Answer in dollars. And assuming there is sufficient cash flow such that target captil structure can be maintained without issuing additional shares of equity, what is its WACC, rounded to two decimal places.
WC, Inc. has a $10,000,000 (face value) a 10 year bond selling for 99% of par that pays an annual coupon of 9% . What would the WC's before tax component cost of debt?
Create a X-Y scatter plot of your data, with the return on the stock as the vertical axis and the return on the market as the horizontal axis. Name this chart as SCATTER in your workbook and be sure to label the axes.
Since the Fed has no direct influence over the bond market, explain why indirectly monetary policy can move the long bond.
A company has developed improvements to a product line. The plant can be converted in one of two ways. Evaluate the NPV of the Type I plant bu using a 12% discount rate.
Roxbury Brothers has sales of 2,250,000; a gross profit of 825,000; total operating costs of $620,000; income taxes of $74,800; and total assets of 995,000.What is Roxbury's Operating Income Return on Investment?
The beginning accounts payable balance is $ 72 million, Assuming all sales are on credit, compute the cash collections from sales for each quarter.
Assume that the car will be driven 120,000 miles over its lifetime of 10 years. The motorist can earn 6% per year on investment.
Suppose you are planning the buy of a Treasury bond in the secondary market. Bonds with five years to maturity, paying a half-yearly coupon of 12% per year,
What is the value of a bond that matures in 5 years, has an annual coupon payment of $110, and a par value of $2,000? Assume a required rate of return of 8.69%. A. $1,876.99 B. $938.50 C. $1,891.36 D. $1,749.83
The manufacture of a new cereal brand wants to conduct in-home product usages tests in Chicago.
Dividend changes may be used by management as a credible communication tool to signal investors about future earnings under which of the following dividend policy theories?
At one time many customers turned to Sears for home improvement projects. As the economy boomed many warehouse stores began to open their doors.
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