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Fournier Industries, a publicly traded waste disposal company, is a highly leveraged firm with 70% debt, 0% preferred stock, and 30% common equity financing. Current the risk-free rate is about 4.5%, and the return on the S&P 500 (the market proxy) is 12.7%. The firm's beta is currently estimated to be 1.65.
(a) What is Fournier's current cost of equity?(b) If the firm shifts is capital sturcture to a less highly leveraged position by selling preferred stock and using the proceeds to retire debt, it expects its beta to drop to 1.20. What is its cost of equity in this case?(c) If the firm shifts its capital strututure to a less highly leveraged position by selling additional shares of common stock and using the proceeds to retire debt, it expects it beta to drop to .95, What is its cost of equity in this case?
Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?
Assume debt tax shields have a net value of $0.25 per dollar of interest paid. Calculate the project's APV.
The equipment is expected to generate net income of $36,000 a year for the first four years and $22,000 a year for the last four years. What is the average accounting rate of return?
Follies Bookstore, the only bookstore close to campus, had a net income of $90,000 in 2009. Here are some of the financial ratios from the annual report
Computation of current yield of a bond and They have a 6-year maturity, an annual coupon of $85
Which project will the stockholders prefer and which project maximizes the value of the firm? Why are these answers different?
increased from 25% to 30%, while your state marginal bracket remained 4.5%? • A corporate bond with a 5.1% after-tax return • An out-of-state municipal bond with a 5.0% after-tax return • An in-state municipal bond with a 4.8% after-tax return
Discuss and explain a process in broad terms of dynamically matching capacity to demand. But a viable option is a constant production rate to maximize production efficiency.
Douglas Keel, a financial analyst for Orange Industries, wishes to determine the rate of return for two similar-risk investments, X and Y. Douglas's research indicates that immediate last returns will serve as reasonable estimates of future returns.
Your parents are giving you $500 a month for five years while you attend college to earn both a bachelor's and a master's degree. Provide financial calculator inputs and check answer.
PepsiCo's operating income was 8.04 billion in 2009 and 6.96 billion in 2008. Based on these figures, which company had higher operating leverage?
Compute earnings per share EPS under each of the three economic scenarios assuming that the firm goes through with the recapitalization
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