Reference no: EM13885155
1. If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock?
2. Calculate all MCC break points for the following information:
Total assets = $1,500,000
Total debt = $600,000
Total equity = $900,000
kd is 10% up to $500,000; 11% after $500,000
ks is 13% up to $100,000; 14% after $100,000
3. Your firm’s ks is 10%, the cost of debt is 6% before taxes, and the tax rate is 40%. Given the following balance sheet, calculate the firm’s after tax WACC:
Total assets = $25,000
Total debt = $15,000
Total equity = $10,000
4. Explain the difference between WACC and MCC.
5. What determines whether to use the dividend growth model approach or the CAPM approach to calculate the cost of equity?
|
Annual deposits into retirement account
: You make $7,200 annual deposits into a retirement account that pays 11.3 percent interest compounded monthly. How large will your account balance be in 33 years?
|
|
Periodic processing system for accounting for inventory
: Prepare the journal entries for the following transactions (1) assuming the company uses the perpetual processing system and (2) assuming the company uses the periodic processing system for accounting for inventory.
|
|
What is present value of this cash flow pattern
: You have been offered the opportunity to invest in a project that will pay $5024 per year at the end of years one through three and $13872 per year at the end of years four and five. If the appropriate discount rate is 18.12 percent per year, what is..
|
|
Why does the firms market value differ from its book value
: Why does the firm’s market value differ from its book value? Do you know how to use the Internet to look up financial information on a company? See if you can find market value and book value for Apple.
|
|
What determines whether to use the dividend growth model
: If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Explain the difference between WACC and MCC. What determines whether to use the dividend growth model approach or the CAPM..
|
|
Butterfly spread from options with strike prices
: A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of 400 options. The options are worth $11, $14, and $18. What is the maximum net gain (after the cost of the options is taken into account)?..
|
|
Concepts associated with making capital investment decisions
: Identify and define the concepts associated with making capital investment decisions such as cash flows, sunk costs, opportunity costs, or others. Why are the concepts important for the investor to factor into the decision-making process?
|
|
New firm in rapidly growing-increasing annual dividend
: The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its..
|
|
Concerning preferred stock
: Which of the following statements is most CORRECT concerning preferred stock?
|