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ABC's capital structure is limited to common equity and bonds. Its target capital structure calls for 79 percent common equity and the rest long term debt. The company's outstanding bonds have a yield to maturity of 4.1 percent. The market risk premium for the average common stock is 8.1 percent, and the risk-free rate on US Treasuries is 5.5. ABC's beta is 1.85. Given its tax rate of 40 percent, what is ABC's weighted average cost of capital? (Show your answer in decimal for to three places, e.g., 12.3% would be entered as 0.123)
Miller and Sons is evaluating a project with the following cash flows: The company uses a 10 percent interest rate on all of its projects. What is the MIRR of the project using the reinvestment approach? The discounting approach? The combination appr..
You know the following concerning a common stock: If you want to earn 10 percent, should you buy this stock? What is the maximum price you should be willing to pay for the stock?
A firm has a beta of 0.2 and an asset beta of 1.9. the debt-to-equity ratio is 75%. Assume the company follows a constant debt-to-equity ratio policy and that the tax rate is 32%, what is the levered equity beta?
Digital Inc. is considering production of a new cell phone. The project will require an investment of $15 million.
A firm’s dividends have grown over the last several years. 10 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm? Round answer to two decimal places.
Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 16 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..
Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.7%. What is the duration if the yield to maturity is 10.7%?
What line items reflected the largest-percentage increases
The two-factor model on a stock provides a risk premium for exposure to market risk of 9%, a risk premium for exposure to interest rate risk of (-1.3%), and a risk-free rate of 3.5%. The beta for exposure to market risk is 1, and the beta for exposur..
Why is the time value of money concept so important to the measurement of financial value? Specifically explain or illustrate how this critical concept is used to aid in measuring financial value. There is an inherent opportunity cost contained in ev..
If the investors' required rate of return for Super Tech stock is 15 percet, what is the stock's share value?
Draw the budget constraint that reflects this EITC for a worker who can work up to 4,000 hours per year at a wage of $10 per hour.
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