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Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 7.32 %. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $55 million. The current stock price is $20 per share; stockholders' required return, rs, is 14.18 %; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the idiot president thinks book weights are more appropriate. What is the difference between these two WACCs?
These are the forecasts of revenues over the lifetime of a project of 5 years. Assume all cash flows occur at the end of the year. What is the IRR of the project?
Frusciante, Inc. has 320,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 5.8 percent paid semiannually, and 12 years to maturity. The current YTM on the bonds is 6.3 percent. The company also has 9.5 million shares of st..
How to combat the problem of the fast changing nature of technology.
Assume that your company considering installing a new computer system that could reduce labor costs by $25,000 each year over the next five years. The purchase price (including installation and testing) of the new system is $105, 250. What is the Net..
What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)?
Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.9 percent. Interest payments are $59.50 and are paid semiannually. The bonds have a current marke..
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $975.28. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,093.03, what is the yield that Trevor would earn by sell..
A company’s financial manager retains earnings:
Buffelhead's stock price is $234 and could halve or double in each six-month period (equivalent to a standard deviation of 96%). Assume that you own an American put option on Buffelhead stock with an exercise price of $234. The interest rate is 19% a..
Since Ben Holt, Blades’ chief financial officer (CFO), believes the growth potential for the roller blade market in Thailand is very high,
Titan Mining Corporation has 16.28 million shares of common stock outstanding and 220,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $33 per share and has a beta of 1.25, and the bonds have 1..
My grandchild will be attending Pace Law School in New York; four-year college, in year 2036. The college tuition and fees for 2015 – 2016 is $45,624 per year. According to the College Board’s Trends in College Pricing, 2015, there is a 3.75% rate in..
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