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Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (D0) was $2.40, its expected constant growth rate is 5%, and its common stock sells for $27. EEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.
What is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.
%
What is the WACC? Round your answer to two decimal places. Do not round your intermediate calculations.
The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29. All risk-free rates being 10%. What is the price of a European put option that expires in six months and has a strike pric..
In what sense does the marginal cost of capital schedule represent a series of average costs? Please explain as thorough as possible.
The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..
Please use the results discussed in lectures and assume annual payments.
What is the Market Value Added (MVA) for this division if the constant growth FCF model applies and the division expects a constant growth in sales and FCFs of 6%?
Suppose that a firm’s recent earnings per share and dividend per share are $2.20 and $1.20, Compute the value of this stock in five years.
Describe what a stock market bubble is, Then explain why they are costly to our economy. What is difference between forward and futures contract.
How have these financial management tools been used in the the successful operation of Grace Kennedy Group company.
Assume the addition to retained earnings for the current period is zero.
Calculating the Rate of Return of Investment Using Financial Leverage. Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. If after three years he sold the property for $120,000. What ..
Consider a wind energy project that produces 399 GWh/yr and is able to sell this at a cost of $0.1/kWh. The project will also receive income in this year from the PTC, at a value of $0.023/kWh. The annual operating expenses come out to be $0.014/kWh ..
White Water Rafters, Inc., (WWR) a competitor of yours, provides rafting tours on the Colorado River. WWR pays tour guides fixed salaries of $170,000 per year. You are the owner of Black Water Rafting (BWR), and you pay your tour guide salaries based..
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