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1. Wild Flowers Express has a debt-equity ratio of .60. The pretax cost of debt is 9 percent while the unlevered cost of capital is 14 percent. What is the cost of equity if the tax rate is 34 percent?
A. 15.98%
B. 8.78%
C. 16.83%
D. 17.30%
E. 7.52%
2. Western Industrial Products is considering a project with a five-year life and an initial cost of $110,000. The discount rate for the project is 13 percent. The firm expects to sell 2,400 units a year. The cash flow per unit is $25. The firm will have the option to abandon this project at the end of year three (after year three's sales) at which time the project's assets could be sold for an estimated $55,000. The firm should abandon the project at the end of year three if the expected level of annual sales, starting with year 4, falls to _____ units or less. Ignore taxes.
1,443 units
2,230 units
928 units
375 units
1,319 units
What is its return on stockholders’ equity? what will be the new return on stockholders’ equity?
Their prices are 6.00, 8.90, 11.10. Is such situation possible. Is it possible to do an arbitrage?
Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..
What price will your bond sell for? What is the Holding period yield on your investment?
Consider that you are 35 years old and have just changed to a new job. You have $152,000 in the retirement plan from your former employer.
Develop a capital budgeting decision model showing cash flows, cost of capital and decision metrics (i.e., npv, irr and payback).
What do you think of the advantage a large firm (for example Wal-Mart) has over a small firm in terms of both working capital management .
What are the relevant cash flows for valuing a share of common stock?
Vanier Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 210,000 shares of stock outstanding. What is the break-even EBIT?
Reference first portion to solve for the second part starting at "suppose the government bond"
Calculate the beta and standard deviation of Stock I. Calculate the beta and standard deviation of Stock II.
Pizza Planet Co. paid a consultant to study the desirability of installing some new equipment.
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