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Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million, a coupon rate of 5 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a coupon rate of 6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 4 years.
Suppose the most recent dividend was $4.20 and the dividend growth rate is 4 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 38 percent. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
David and Cheryl Allen are in their mid-30's and have two children, ages 8 and 5. They have combined annual income of $95,000 and own a house in joint tenancy with a market value of $310,000, on which they have a mortgage of $250,000. explain why it'..
You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –25.8 percent, 14.2 percent, 31.4 percent, 2.6 percent, and 21.6 percent. The average inflation rate over this period was 3.26 percent and the average T-b..
Analyzing a firm’s financial position is essential for those in charge to make their plans as you have mentioned. It is not clear how the ratios can work to the advantage of the firm or against the firm. You have also not derived how these ratios can..
Which of the following statements concerning junk bonds is most correct?
Factors affecting exchange rates. If the Asian countries experience a decline in economic growth (and experience a decline in inflation and interest rates as a result), how will their currency values be affected?
Debt: 10,000 6% coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling at par, quarterly payment. Comment stock: 500,000 shares outstanding, selling for $25 per share, the beta is 1.2. Preferred stock: 15,000 shares of 5 percent pr..
CAR Inc. will be liquidated in one year. The value of CAR’s assets is currently $650 million, and next year it will be either $825 million or $400 million. Before shareholders can be paid next year, CAR will have to repay $500 million of debt. What i..
Discuss present value and future value annuities and annuity dues. What is the timing of cash flows? What are their differences? What are the advantages of both? How are they used by financial management?
Maximization of shareholder wealth
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent. Project A s Cash flow from year 0 to year 3: -1000, 400, 40..
Northern Boat Mfg., Inc. has a weighted average cost of capital (WACC) of 16.8 percent, given the firm’s current boat-making operations. Home Builders, Inc. has a WACC of 14.4 percent, given that the firm builds new, single-family homes. Both firms a..
Prepare 15 slides or power point presentation on "What is the nature of Financial Management".
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