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Securities Firms :
What are the functions of securities firms?
Many securities firms employ brokers and dealers. Distinguish between the functions of a broker and those of a dealer, and explain how each is compensated.
The Morris Corporation has $950,000 of debt outstanding, and it pays an interest rate of 8% annually. Morris's annual sales are $3.8 million, its average tax rate is 35%, and its net profit margin on sales is 3%. If the company does not maintain a TI..
Miller Brothers Hardware paid an annual dividend of $1.15 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 12 percent rate of return, how much are you willing to pay..
Common stock financing is often considered the safest form of financing, as the issuing firm is under no obligation to pay dividends. Owners of common shares assume this uncertainty in the hope of favourable returns. What is the argument for issuing ..
Ackert Company's last dividend was $0.50. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (r) is 12.0%. What is the best estimat..
Flavortech expects EBIT of $2,000,000 for the current year. The firm's capital structure consists of 40% debt and 60% equity and its marginal tax rate is 40%. The cost of equity is 14% and the company pays a 10% rate on its $5,000,000 of long term de..
A stock has an expected return of 10%, its beta is .9, and the risk-free rate is 5%. What is the expected return on the market? A stock has an expected return of 12%, the risk-free rate is 3%, and the market risk premium is 6%. What is the beta of th..
A semi annual coupon bond with face value of $1000 has a coupon rate of 8% and matures in 12 years. The market-determined discount rate on this bond is 9%. What is the price of the bond? Round to the penny. What is the coupon rate of a bond with a fa..
WACC and Cost of Common Equity Kahn Inc. has a target capital structure of 65% common equity and 35% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 16%, a before-tax cost of debt of 8%, and a tax rate of 40%. W..
For project A, the cash flow effect from the change in net working capital is expected to be -300 dollars at time 2 and the level of net working capital is expected to be 1,600 dollars at time 2. What is the level of current liabilities for project A..
To estimate the cost of capital, you have been provided with the following data: rRF = 5.00%; the market return is 11.00%; and Beta = 1.0. Based on the CAPM approach, what is the cost of equity? -------- 5.0% 6.0% 10.4% 11.0%
The Trektronics store begins each week with 240 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $29 per year and the fixed order cost is $51. What are the current total carrying costs? (Do not round i..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wort..
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