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Acort Industries has 5 million shares outstanding and a current share price of $41 per share. It also has? long-term debt outstanding. This debt is risk free, is four years away from maturity, has an annual coupon rate of 10%, and has a $112 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 6%. Acort has EBIT of $108 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $18 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 35%, and Acort is expected to keep its debt-equity ratio constant in the future? (by either issuing additional new debt or buying back some debt as time goes on).
a. Based on this information, estimate Acort's WACC. The WACC is _______%. ? (Round to two decimal places.)
b. What is Acort's equity cost of capital? The equity cost of capital is _______g%.?(Round to two decimal places.)
Scott Investors, Inc., is considering the purchase of a $371,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method. The market value of the computer will be $71,000 in ..
What return on equity do investors seem to expect for a firm with a $55 share price, an expected dividend of $5.50, a beta of .9 and a constant growth rate of 5.5%? A. 9.00% B. 10.00% C. 13.95% D. 15.50%
Looking at a list of beta coefficients you spot a number of stocks as possible buys for your new stock portfolio. You have $80,000 to invest. You have decided to have just three stocks in your portfolio (this will make it easier to follow than a port..
The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. What is the net asset value per share?
Consider defined-benefit retirement plans and defined-contribution retirement plans and document the primary characteristics of each. Specifically, contrast the responsibilities of the employer in administering each plan. Which plan is more risky for..
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.20 −38% −12% Mild recession 0.20 −26% 7% Normal growth 0.35 8% 3% Boom 0.25 46% 7% a. Calculate the values of mean return and var..
On March 11, 20XX, the existing or current (spot) 1-, 2-, 3-, and 4-year zero coupon Treasury security rates were as follows: 1R1 = 0.35%, 1R2 = 0.95%, 1R3 = 1.35%, 1R4 = 1.50% Using the unbiased expectations theory, calculate the 1-year forward rate..
The prices of long-term bonds are less volatile than those of short-term bonds because long-term bonds respond less strongly to change in interest rates.
A financial institution offers a "double your money" savings account in which you will have $2 in 7 years for every dollar you invest today. What stated annual interest rate (assuming monthly compounding) does this account offer?
Renfro Rentals has issued bonds that have a 7% coupon rate, payable semiannually. The bonds mature in 18 years, have a face value of $1,000, and a yield to maturity of 8%. What is the price of the bonds? Round your answer to the nearest cent.
What is the “signaling hypothesis” as it regards a firm’s dividend policy? How might the signaling hypothesis be used to justify the observed practice of “dividend smoothing” in the real world?
Topic: Comparison of Sage 50 Accounting and at least one other accounting software package.(research paper at least 3 source and 2 pages)
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