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Weston Industries has a debt-equity ratio of 1.5. Its WACC is 10.5 percent, and its cost of debt is 6 percent. The corporate tax rate is 35 percent. What is the company's cost of equity capital What is the company's unlevered cost of equity capital What would the cost of equity be if the debt-equity ratio were 2 What if it were 1.0 What if it were zero
You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 7 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 11 p..
Calculate and interpret the ratios - Industry Average Return on assets (ROA) 5.2% Current ratio 2.0 Days cash on hand 22 daysAverage collection
General Matter’s outstanding bond issue has a coupon rate of 9.4%, and it sells at a yield to maturity of 7.80%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face..
Assume the risk-free rate of return is 2% and the market risk premium is 8%. If you are a risk averse investor, which project should you choose? a. Either Project 2 or Project 3 because the higher expected return on project 3 offsets its higher risk.
Eight years ago, Goodwynn & Wolf Incorporated sold a 29-year bond issue with a 9% annual coupon rate and a 6% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return..
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has a cost of equity of 10%; 25% of its financing is in the form of 6% debt, and the rest is in common equity. Its federal-plus-state tax rate is 38%. After this, ..
We are evaluating a project that costs $739,000, has an seven-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 134,000 units per year. Price per unit is $44, v..
Describe how Bach could use a straddle to hedge its possible positions in dirham. Consider three scenarios. In the first scenario, the dirham's spot rate at option expiration is equal to the exercise price of 0.98 euro.
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.7%. What is the duration if the yield to maturity is 10.7%?
An investment pays $2,100 per year for the first 3 years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fa..
A project that costs $2,700 to install will provide annual cash flows of $770 for each of the next 6 years. Calculate the NPV if the opportunity cost of capital is 11%? What is the project's internal rate of return IRR?
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