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The common stock and debt of Northern Sludge are valued at $56 million and $44 million, respectively. Investors currently require a return of 16.8% on the common stock and 6.9% on the debt. If Northern Sludge issues an additional $20 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Whitewall Tire Co. just paid an annual dividend of $1.35 on its common shares. If Whitewall is expected to increase its annual dividend by 3.00 percent per year into the foreseeable future and the current price of Whitewall’s common shares is $14.73,..
The shareholders of the Spartan Corp. are electing six individuals to serve as directors on their board. There are 3 million shares outstanding. How many shares would you need to hold to be certain that you can elect at least one director assuming th..
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales $3,200 Current assets $3,401 Debt $6,801 Costs 2,112 Fixed assets 8,328 Equity 4,928 Taxable income $1,088 Total $11,729 Total $11,729 Taxes (33%) ..
Which of the following is a chief advantage of factoring of receivables? Factoring is a cheap way to finance Factoring transfers the risk of default to the factor Factoring lengthens the Operating Cycle Factoring is easily obtainable during economic ..
Suppose a semi-annual coupon bond has coupon rate of 3.5%, maturity of 10-years and price per $100 of face value equal to 106. What can you say about the relationship between the yield to maturity and the coupon rate?
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 (rmc078-1.jpg) is 12.0%. What is the b..
A company has $6.20 per unit in variable costs and $4.90 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.42, what price should be charged if 66,000 units are expected to be sold?
Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semi-annually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity? George, Inc. bonds have a face value of $1,000 and a 9% coup..
You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost $1,500,000 ten years ago; if your company sold the land today, it would ..
Your firm is contemplating the purchase of a new $1,036,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $100,800 at the end of that time. At what level of pretax cost ..
Which of the following are argued to be distinctive characteristics of the corporation?
Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 3.50%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is..
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