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Percy Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 14.90%. What is Percy's cost of common equity?
Your real-estate company is considering buying a $5 million dollar hotel. The company already pays taxes at the highest scale. The hotel is expected to earn $20 million dollars (in today’s dollars) every year and have expenses of $17 million dollars ..
We are evaluating a project that costs $956,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,400 units per year. Suppose the projections giv..
What is your estimate of the cost of equity capital for Amgel (based on the CAPM)? what is the firm’s overall weighted average cost of capital (WACC)?
If sales increase by $10,000 then their profit increases/decreases by how much?
What is the price of a European put option expiring in 6 months with strike price $28.
If the rate of inflation is 5.9 % what nominal interest rate is necessary for you to earn 2.6% real interest rate on your investment?
In the stock valuation model, Intrinsic value is based on which of the following factors? I the applied discount rate. II. the amount of risk inherent in a particular stock. III. historical net profits of the company. IV. estimated future cash flows ..
A 30-year bond is maturing in 5 years. The par value is $1000. The coupon rate is 6%. Coupon payment is made semi-annually. The price of this bond is $950. a) What is the yield to maturity? b) A new-issued 5-year zero coupon bond has the same yield s..
What is the present value of each alternative? Since the land and anything on it will belong to the lessor in 15 years, assume that once the trees are harvested the land will not be replanted by Citrus.
The required return for investors in the first three years is 12 percent and 10 percent for the following three years. After those six years the required return is 8 percent. What is the current share price of the stock?
Suppose a businessman has an idea to build an electric motor cycle. Using the capital budgeting method, is this project financially worthwhile?
Stock X is expected to pay a dividend of $3.00 at the end of the year, i.e., D1 = $3.00, and that dividend is expected to grow at a constant rate of 6% a year. The stock currently trades at a price of $50 a share. Assume that the stock is in equilibr..
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