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1. You are evaluating a project which requires $230,000 in external financing. The flotation cost of equity is 11.6 percent and the flotation cost of debt is 5.4 percent. What is the initial cost of the project including the flotation costs if you maintain a debt-equity ratio of 0.45?
2. A stock just paid dividends of $2 per share. Growth of these dividends is expected to be 20% for the next two years followed by constant growth of 8% thereafter. The required return is 12% what price should this stock sell for?
3. A 30-year, $200,000 adjustable-rate mortgage starts out with the rate of 4%. The borrower makes only the required payments in the first year. If after one year the rate resets to 6%, what is the new required payment?
You recently purchased a stock that is expected to earn 14 percent in a booming economy, 8 percent in a normal economy, and lose 6 percent in a recessionary economy. There is a 14 percent probability of a boom, a 76 percent chance of a normal economy..
Identifying agency problems, costs, and resolutions Explain why each of the following situations is an agency problem and what costs to the firm might result from it. Suggest how the problem might be handled short of firing the individual(s) involved..
Write a 700- to 1,000-word paper identifying the specific cost accounting system an organization utilizes and how it uses the accounting information for financial management. Your paper must include the following
Brandies Candies has total assets of $1,200, total equity of $900, an ROA of 15%, and a dividend payout ratio of 40%. What is the internal growth rate of Brandies Candies?
what is the accounting break-even point? what is the cash break-even point?
Differentiate among Capital Allocation Line (CAL), Capital Market Line (CML), and Security Market Line (SML).
The Black Bird Company plans an expansion. The expansion is to be financed by selling $56 million in new debt and $116 million in new common stock. The before-tax required rate of return on debt is 6.09% percent and the required rate of return on equ..
Discuss the determinants of foreign exchange rates. Include a detailed discussion of the Monetary PPP model: e* = Pi – Pj = [M, p, r], and its addition of (a, w) to determine the spot rate [e].
Use Black Scholes option pricing model to calculate the price of the call option.
The Hen House is expected to pay an annual dividend of $2.10 a share next year. The company recently announced that future dividends will increase by 2.5 percent annually. The market price is $51.30 a share. What is the cost of equity?
We are evaluating a project that costs $1,120,000, has a ten-year life, and has no salvage value. Calculate the best-case and worst-case NPV figures.
Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $65 million, ..
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