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Bruce & Co. expects its EBIT to be $91,000 every year forever. The company can borrow at 4 percent. The company currently has no debt, and its cost of equity is 11 percent. If the tax rate is 35 percent, what is the value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the company $ What will the value be if the company borrows $136,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the comapny $
Suppose you bought a 20-year, $1,000 face-value bond for par 5 years ago. The annual coupon rate on this bond is 8.5% and interest payments are paid annually. The annual coupon rate on this bond is 8.5% and interest payments are paid annually. If ret..
Compute the current price of the bond using an assumption of semiannual payments.
Say you decide to start a firm and you need $500 million of capital to begin. You sell stock for its par value, a total of one million shares (par value is $200 per share), and sell $300 million of bonds at par value. You use the capital you just rai..
A bond is a common investment opportunity. Suppose you have the opportunity to buy a bond with a par value of $1,000 and semi-annual coupon payments of $40 that matures in 10 years. Supposing this bond is available for $960, what is the payback perio..
Cost of Common Equity and WACC Patton Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock. Its before-tax cost of debt is 11% and its marginal tax rate is 40%. The current stock price is P0 = $..
April wants to create a scholarship fund by making annual savings donations to the fund for several years before the fund starts making annual scholarship payments forever. She plans to save 22,900 dollars per year in the trust fund for 5 years.
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. Calculate the NPV of this investment.
An insurance company is analyzing the following three bonds, What is the duration of each of the three bonds?
Which of the following statements about flotation costs is incorrect: Flotation costs for debt is typically lower than flotation costs for equity. As a company issues more equity the flotation costs, as a percentage of the capital raised, decreases. ..
Assume a clinical laboratory is considering a new test. Here are the key assumptions: annual fixed direct costs = $20,000, annual overhead allocation = $10,000, variable cost per test = $5, and expected volume = 5,000 tests. What price should be set ..
Why is it powerful to be able to quantitatively assess one's level of intercultural competence? Please utilize the course readings in your response.
Analyze the difference between impact on the interest rate, investment and the price level of a temporary change in government spending financed.
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