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1. Dominosa, Inc. wants to have a weighted average cost of capital of 7.3 percent. The firm has an aftertax cost of debt of 5.1 percent and a cost of equity of 11.8 percent. What debt ratio is needed for the firm to achieve their targeted weighted average cost of capital? Enter answer in percents.
2. A call option is currently selling for $4.60. It has a strike price of $60 and three months to maturity. A put option with the same strike price sells for $7.20. The risk-free rate is 6%, and the stock will pay a dividend of $2.10 in 3 months. What is the current price of the stock?
Bond J has a coupon rate of 4.2 percent. Bond S has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, make semiannual payments, and have a YTM of 9.4 percent. Requirement 1: If interest rates suddenly rise by 2 percent, what is th..
AAA Company is expanding rapidly and currently needs to retain all of its earnings. what is the value of the stock today?
What is the NPV of the decision to purchase a new machine? What is the NPV of the decision to keep the old machine?
Compute the net present value of an investment with 5 years of annual cash inflows of $100 and two cash outflows, one today of $100 and one at the beginning of the second year of $50. Use a discount rate of 10 percent.
The present value of the following cash flows is known to be $6,939.91; $500 today, What discount rate is being used?
What is the annual rate of return for the investment? What is the net present value of the investment?
Lisa Sweet, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about .15 on an annual basis over the last..
Estimate the unlevered beta of BetLev
Schalheim Sisters Inc. has always paid out all of its earnings as dividends, hence the firm has no retained earnings. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, its target capi..
In general, the cost of debt capital is lower than the cost of equity capital.
You have the following information: S=65, X=60, T=1, r=0, C=7, P=4 Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy? Sell Call, Buy Put, Short Stock, Invest remainder Sell Call, B..
If Jamesway takes $0.25 million in cash and pays off $0.25 million of current liabilities, what happens to its current and quick ratios? What happens to its real liquidity?
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