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The target capital structure for Millennium Corporation is 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 15 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent.
a) What is Millennium's WACC?
b) The company president has approached you about its capital structure. He wants to know why the company doesn't use more preferred stock ?nancing because it costs less than debt. What would you tell the president?
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An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6.
Explain how this repurchase would affect (increase, decrease, or have no effect on) the components of the accounting equation: assets, liabilities, shareholders' equity. Would a gain or loss be recognized on the transaction?
Your supplier offers terms of 1/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45?
If a bank pays a 4,50% nominal rate with monthly compounding on deposits, what effective annual rate does the bank pay?
Have your spreadsheet be fully functional? Have each worksheet be clearly labeled to identify the associated problem.
An investor has $5,000 invested in a stock which has an estimated beta of 1.2, and another $15,000 invested in stock of the firm for which he works. The risk free rate is 6% and the market risk premium is also 6%.
My Inc. has a dividend growth rate of 6 percent, a market price of $16 a share, and a required return of 16 percent. What is the amount of the last dividend.
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Determine the profit equations for this position, and identify the breakeven stock price at expiration and maximum and minimum profits ? Explain the advantages and disadvantages to a covered call writer of closing out the position prior to expirat..
Derive the minimum-variance portfolio for a 12% expected return and:
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