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Williamson, Inc., has a debt–equity ratio of 2.57. The company's weighted average cost of capital is 9 percent, and its pretax cost of debt is 7 percent. The corporate tax rate is 40 percent.
a. What is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c. What would the company’s weighted average cost of capital be if the company's debt–equity ratio were .65 and 1.60? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Cornerstone Industries has a bond outstanding that has a 5% coupon paid semiannually and a market price of $927.64. If the bond matures in 5 years, what is the yield to maturity? J&J Manufacturing just issued a bond with $1,000 face value and 4.5% co..
On January 1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively. Any rem..
Cash flows from operating activities might include:
Storico Co. just paid a dividend of $1.90 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Which of the following four investments has the highest PV? (Assume your required rate of return is 5% annually)
Over the past several years there has been debate over the directions of U.S. fiscal and monetary policies. On the one hand, there are looming U.S. debt and deficit issues. On the other hand, there are the low interest rate policies of the Federal Re..
You can purchase a building for $375,000. The Investment will generate $25,000 in cash flows during the first three years. At the end of the three years you will sell this building for $450,000. What is the IRR on this investment? Is it possible to u..
Compare and contrast the two companies in terms of how well or how poorly they are performing in the areas of profit, debt, and asset turnover. Use appropriate ratios in your analysis. Indicate strategies for possible improvement in each area. the co..
Regarding the auto industry, do you see vehicles being standard across the globe so manufacturers don't need to create different models in different areas? Chances are that in 20 years driverless cars will be common if not prevalent so this industry ..
Your stock portfolio is worth $10M with a beta of 1.1. The spot price of S&P 500 is 950. Each S&P 500 contract is for $250 per index points. To protect against the market decline. How many futures contract should you need? Would you go short or long ..
In 1970, they raised $4.5 million through an IPO. Arkansas-based Stephens Inc. and Boston-based White Weild handled the IPO. As the company grew, the Waltons set up Walton Enterprises, which owns shares of the company. 1. Identify one of the under..
The standard normal transformation:
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