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Olsen Outfitters Inc. believes that its optimal capital structure consists of 50% common equity and 50% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 14%. New common stock in an amount up to $9 million would have a cost of re = 16%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 11%, and an additional $3 million of debt at rd = 12%. The CFO estimates that a proposed expansion would require an investment of $4.2 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.
Calculate the beta of your portfolio, which comprises the following items: (a) Olympic Steel stock, which has a beta of 2.2 and comprises 40 percent of your portfolio, (b) Rent-a-Center stock, which has a beta of 1.5 and comprises 28 percent of your ..
Deshawn Carter has just received his open-enrollment notification and has asked you to assess his disability insurance coverage. He currently has a long-term, any-occupation disability policy available through his employer that pays a benefit of 8..
Suppose Supercompany uses all equity for an acquisition. Later, how could it make financial transactions that move it back to its chosen capital structure without necessarily affecting assets at that later date? propose an effective strategy?
How can the Fed cause the real interest rate to increase or decrease?- Why would a decline in real interest rates cause an increase in housing prices?
Which one of the following costs was incurred in the past and cannot be recouped? A project will produce an operating cash flow of $31,200 a year for 7 years. The initial fixed asset investment in the project will be $204,900. What is the net present..
An article in the Economist magazine noted: "the economy's potential to supply goods and services [is] determined by such things as the labour force and capital stock, as well as inflation expectations."
What is the yield to maturity at a current market price of $868?
Gold Rush Mining is evaluating when to open a gold mine. The mine has 48,800 ounces of gold left that can be mined, and mining operations will produce 6,100 ounces per year. The required return on the gold mine is 11 percent, and it will cost $34.1 m..
Seattle Health Plans currently uses zero-debt financing. Its operating income (EBIT) is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all-equity financed, $5 million in equity.
Plush Pilots, Inc. has balance sheet equity of $5.2 million. At the same time, the income statement shows net income of $743,600. The company paid dividends of $423,852 and has 130,000 shares of stock outstanding. If the benchmark PE ratio is 21, wha..
Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2014. Alden financed $39,052,588, and the note agreement will require $10.04 million in annual payments starting ..
Consider an investor woh, on January 1, 2017, purchases a TIPS bond with an original principal of $100,000, an 4.50 percent annual (or 2.25 percent semiannual) coupon rate, and 5 years to maturity. Suppose that the semiannual inflation rate for the s..
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