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ABC, inc. operates in a country whose risk-free rate is 4.25%. The expected return of the market in the country is 12.10% and the company has a beta of 1.12. The company has a bank loan with an interest rate of 8.5%. The company’s corporate tax rate is 35% and its optimal capital structure is 75% debt and 25% equity.
A) What is firm’s cost of equity?
B) What is the firm’s WACC?
State Probability Return: Stock 1 Return: Stock2 Bear .25 -.020 .034 Normal .60 .138 .062 Bull .15 .218 .092 a) Calculate the covariance of return between Stock 1 and Stock 2\ b) Calculate the correlation of return between Stock 1 and Stock 2. c) If ..
Camillia plans to go on vacation to Australia 11 years from now. She estimates that she will need $24,186 for the trip. How much does she need to place in the savings account today, assuming that she earns 7.59 percent per year, compounded QUARTERLY,..
About the proposed development of standards to measure performance and to reward superior performance in her department.
Calculate the monthly payment required on a mortgage with the following characteristics: (a) Loan Value: $325,000, (b) Interest Rate: 4.25%, and (c) Years: 30.
What would be the number of shares outstanding after the distribution of the stock dividend? What would be the equity accounts be after the stock dividend?
The Elkmont Corporation needs to raise $51.2 million to finance its expansion into new markets. How many shares need to be sold?
DDD uses constant 12% WACC as discount rate while evaluating all its domestic projects. What do you foresee happening with its WACC in the next five years?
Use this data table of Campbell Industries liabilities and owners' equity to complete parts a and b. What percentage of the firm's assets does the firm finance using debt (liabilities)? If Campbell were to purchase a new warehouse for $1.3 million a..
A call option on Barry Enterprises stock has a market price of $10. What is the premium on the option?
PK Software has 8.2 percent coupon bonds on the market with 25 years to maturity. The bonds make semiannual payments and currently sell for 109.75 percent of par. What is the current yield on PK's bonds? What is the effective annual yield?
What is their nominal yield to maturity? What return should investors expect to earn on these bonds?
Total cash reserve in the ban king system amount to $78 billion of which $30 billion are legal require reserves. Currency and coin in public hands total $60 bill ion. Total deposits in the ban king system amount to $ 600 million. What is the amount o..
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