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Compute the weighted average cost of capital for each of these firms. Assume a marginal tax rate of 40 percent. Target capital structure is 40% debt and 60% common equity. Yield to maturity on bonds is 8.5% and expected return on common equity is 11.1%. Target capital structure is 30% debt and 70% common equity. Yield to maturity on bonds is 6.7% and expected return on common equity is 9.5%. Target capital structure is 10% debt and 90% common equity. Yield to maturity on bonds is 7.9% and expected return on common equity is 9.9%. Target capital structure is 60% debt and 40% common equity. Yield to maturity on bonds is 4.9% and expected return on common equity is 12.1%. Target capital structure is 80% debt and 20% common equity. Yield to maturity on bonds is 6.1% and expected return on common equity is 16.0%.
How would company managers and investors use the WACC for an overall company valuation analysis?
Company ‘1063 has a current period cash flow of $1.3 million and pays no dividends. The present value of the company’s future cash flows is $17 million. The company is entirely financed with equity, and has 400,000 shares outstanding. Assume the divi..
These are callable in 8 years at a call price of $540. Using semiannual compounding, what is the yield to call for these bonds?
Assume the Australian dollar buys 0.75 U.S. dollars and the one-year forward rate is $/AUD 0.7515. Is the Australian dollar quoted at the forward discount or at the forward premium?
Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17 percent and the standard deviation of those returns in this period was 43.68 percent. What about triple in value?
When looking at these types of projects, one must consider any cash flows that arise from surrendering old equipment before the end of its useful life.
Ngala LLC has 5,000 bonds outstanding which are currently priced at $1,200 each. The bonds pay a coupon of 7.6% (paid semi annually) and mature in 7 years. The bonds have a face value of $1,000 each. Determine (a) the weights of each source of capit..
The yield rate on a one year zero-coupon bond is currently 7% and the yield rate on a 2 year zero coupon is currently 8%. The treasury plans to issue a two year bond with a 9% annual coupon, maturing at $100 par value. Determine the yield to maturity..
You are constructing a two stock portfolio based on the information provided below. What dollar amount will you invest in each stock to achieve the desired return goal? Stock X Stock Y Expected Return 14.0% 9.0% Goal Return of Portfolio: 10.00% Dolla..
Mike purchased a sports shop for $186,000. His bank is willing to finance 75% of the purchase price. As part of the mortgage closing costs, Mike had to pay 3 1/4 discount points. How much did this amount to?
Talia’s Tutus is considering purchasing a new sewing machine. The old machine it has right now was bought 2 years ago for $30,000, with an assume life of 5 years and an assume salvage value of $5,000. The firm uses straight-line depreciation.
important in the construction of investment portfolio?
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