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BlockOut Co. has 79,594 bonds outstanding that are selling at par value. The bonds yield 8 percent. The company also has 5.6 million shares of common stock outstanding. The stock has a beta of 1.39 and sells for $47.7 a share. The U.S. Treasury bill is yielding 4 percent and the market risk premium is 7.5 percent. Blackout's tax rate is 39 percent. What is the firm's weighted average cost of capital? (Enter answer in percents.)
Companies with rapidly growing levels of sales do not need to worry about raising funds from outside the firm. Do you agree or disagree with this statement? Explain.
You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $75,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retire..
Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $37 million, a maturity of 10 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with c..
George and Margaret Wealthy are in the 42 percent tax bracket, considering both federal and state personal taxes. Norman Briggs, then CEO of Community General Hospital, has been aggressively pursuing the couple to contribute $400 thousand to the hosp..
Mahjong, Inc., has identified the following two mutually exclusive projects: What is the IRR for Project A? If the required return is 8 percent, what is the NPV for Project A? At what discount rate would the company be indifferent between these two..
Dharma Supply has earnings before interest and taxes (EBIT) of $568,000, interest expenses of $299,000 and faces a corporate tax rate of 34 percent. a. What is Dharma Supply's Net Income? b. What would Dharmas net income be if it didn’t have any debt..
Cookie Dough Manufacturing has a target debt-equity ratio of .6. Its cost of equity is 16 percent, and its pretax cost of debt is 9 percent. What is the firm's WACC given a tax rate of 34 percent? 12.23 percent 12.78 percent 13.11 percent 13.48 perce..
You are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever...
An investor purchases a 30-year municipal bond for $940. The bonds coupon rate is 9 percent and, it still had eighteen years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value and his marginal t..
If a company has a return on assets of 10% and a net profit margin of 5%, what is the company's total asset turnover?
Your firm needs a computerized machine tool lathe which costs $42,000 and requires $11,200 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category...
The IRS is revaluating the asset life categories used for ACRS depreciation. The trucks that JK Industries use are currently classified by the IRS as having an asset life of 7 years. Because these trucks actually last for 10 years, the firm’s manager..
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