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Sen Import and Export Inc. has a target capital structure of 40% debt and 60% equity. The Yield to maturity (YTM) of their bond issue is 9% and the corporate tax rate is 40%. The company’s CFO has calculated its WACC to be 9.75%. Given this information, what is the company’s cost of equity?
Also, suppose the CFO of the company wants to reduce its WACC. The simplest way to do this is by increasing the weight of debt in its capital structure. If his target WACC is 8.25%, what would the debt –equity mix of the company under this condition?
Your boss makes you an offer: He will give you $3000 at the end of each year for the next six years,, if you agree to pay him back $2500 at the end of each of the following ten years. Should you accept if cost of funds is 2% compounding annually?
We will now look at 3 different situations where we can adapt this generalized model to each of these situations to determine stock's intrinsic value.
Assuming that you own all the assets listed below, what is the expected return of your portfolio?
ABC, Inc. has been experiencing cash shortages due to its high growth rate.
Is it possible for a firm to have a positive profit and yet have a negative cash flow?
Consider the following cost alternatives with 10 year useful lives. The company has a MARR = 15%. Using suitable Excel functions, perform an incremental IRR analysis to determine the best alternative. Clearly lay out each step of the analysis and its..
Treasury bills outperformed inflation every year during the period 1925-2012. Small-company stocks outperformed large-company stocks every year during the period 1925-2012. On an annual basis, small-company stocks had more consistent rates of return ..
At the same time the Fed decrease the actual supply by 1,000 million dollars. What is the change in total trading cash volume in this economy?
What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.55 billion gain in Berkshire's market value of equity imply about the ..
How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?
?You're considering an investment that you expect will produce a return of 9 percent next? year, The expected inflation rate next year will be?
You are planning to make monthly deposits of $450 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 25 years?
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