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Gnomes R Us is considering a new project. The company has a debt-equity ratio of .78. The company’s cost of equity is 14.6 percent, and the aftertax cost of debt is 7.9 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. Requirement 1: What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) WACC % Requirement 2: What discount rate should the firm use for the project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Project discount rate %
The corporate bylaws are identical for all firms incorporated in a particular state. Corporate bylaws dictate a firm's behavior inside its home country and corporate charter outline rules for operating in foreign countries. For a manufacturing firm, ..
What semi-annually sinking fund payment would be required to yield 46000 seven years from now? The annual interest rate is 4% compounded semi-annually? and the table is at 7 periods 0.1266096 and at 14 periods it is 0.0546690
Oak Enterprises has a beta of 1.2, the market return is 8%, and the T-bill rate is 4%. What is their expected required return of common equity?
Consider an annual coupon bond with a face value of $100, 15 years to maturity, and a price of $88. The coupon rate on the bond is 5%. If you can reinvest coupons at a rate of 3.5% per annum, then how much money do you have if you hold the bond to ma..
Fifteenth Bank has an issue preferred stock with $8 stated dividend that just sold for $89 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places).
Which of the following statements regarding capital budgeting criteria is INCORRECT?
Allen Lumber Company had earnings after taxes of $500,000 in the year 2009 with 420,000 shares outstanding on December 31, 2009. On January 1, 2010, the firm issued 25,000 new shares. Because of the proceeds from these new shares and other operating ..
The cost of the truck is $18,000 and he is approved for an 8% loan but can choose to finance the loan for either 48 or 60 months. What will be the additional cost if he chooses the 60 month term instead of 48 months? You can assume that he can afford..
Cessalin Company sells artificial flower arrangements for $25.75 per arrangement. The company has fixed operating costs of $38,430 per year. They also have variable cost per arrangement of $10.50. What are the operating breakeven points in units?
Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=4.45%, E(2r1) =5.45%, E(3r1) =5.95%..
Technology Corp. is considering a $260,000 investment in a new marketing campaign which they anticipate will provide annual cash flows of $54,000 for the next 6 years. The firm has a 10% cost of capital. What should the analysis indicate to the firm'..
Early in September 1983, it took 255 Japanese yen to equal $1. Nearly 28 years later, in August 2011, that exchange rate had fallen to 125 yen to $1. Has the price, in dollars, of the automobile increased or decreased during the 28-year period becaus..
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