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Acetate, Inc., has equity with a market value of $35 million and debt with a market value of $15 million. Treasury bills that mature in one year yield 2% per year, and the expected return on the market portfolio is 10%. The beta of Acetate's equity is 1.15. The firm pays no taxes.a. What is Acetate's debt-equity ratio?b. Assume Acetate could borrow at the Treasury rate. What is Acetate's WACC? (hint: use CAPM to solve for the cost of equity first)c. What is the cost of capital for an otherwise identical all-equity firm? (hint: use MM proposition II)d. What conclusion(s) could be drawn from your answers to part b and part c?
It is April 1. The quoted price of a bond with an Actual/365 day count and 12% per annum coupon in the U.S. is 105. It has a face value of 100 and pays coupons on March 1 and Sept 1. What, to two decimal place accuracy, is the cash price?
Computation of internal rate of return of the bond and what was your internal rate of return
If the returns on large corporation stocks are normally distributed, for which of the following returns can you not state, with 95 percent confidence that next years stock return might be equal to?
Suppose on January 1 you deposit $100 in an account that pays a nominal, or quoted interest rate of 11.33463%,with interest added (compounded) daily.
Discuss what mutual funds are and why people invest in them? Are they safe? Why or why not? Explain.
Johnson currently maintains an average demand deposit of $80k. Estimate the cost of the line of credit to Johnson. c. Which source of credit should Johnson select, Why?
If you can invest the cash flows at 7 percent, how much will you be willing to pay for this perpetuity? (Round to the nearest dollar.)
The company will incur $7,000,000 in annual fixed costs. The plan is to manufacture 18,000 RDSs per year and sell them at $10,900 per machine; the variable production costs are $9,400 per RDS. What is the annual operating cash flow (OCF) from this..
Bechtel Machinery stock currently sells for $65 per share. The market requires a 14 percent return on the firm's stock. The company maintains a constant 8 percent growth rate in dividends. What was the most recent annual dividend per share paid on..
You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond.
Calculation IRR, NPV, MIRR, payback and discounted payback and if the projects are mutually exclusive, which would you recommend
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of $30 each blanket.
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