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Edwards Construction currently has debt outstanding with a market value of $450,000 and a cost of 8 percent. The company has an EBIT of $36,000 that is expected to contiune in perpetuity. Assume there are no taxes. What is the value of the company's equity and the debt to value ratio? What is the equity value and the debt-to-value ratio if the company's growth rate is 3 percent? What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent?
Bond valuation relationships the 15 year, $1,00o par value bonds of Waco industries pay 6% interest annually. the market price of the bond is $855, and the market's required yield to maturity on a comparable risk bond is 9%. what is your yield to mat..
You are considering the following two mutually exclusive projects. what is the best reason for that decision?
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,000. Use of the truck wil..
A firm is considering whether to issue the following securities: Fees reduce the proceeds to the issuer on the issuance date. Which financing alternative is best? Calculate borrowing costs and discuss other factors that might influence your decision
Eric works for a company with a defined contribution benefit pension plan. He will retire in ten years (at age 65) and expects his salary to be $100,000 in his last year of work. Social security should pay him $1,325 per month at that time. If he nee..
Define and discuss implementation of the following calculations within capital budgeting: IRR, NPV, and Marginal Cost of Capital. When would these be used and what do they tell us?
Six-month T-bills have a nominal rate of 5%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 3%. In the spot exchange market, 1 yen equals $0.01. If interest rate parity holds, what is the 6-month forward exchange rat..
One year ago you converted $1,000 to yen at the rate of 125 yen to $1 and invested in Japanese securities. You just sold the securities for 137,500 yen. The current exchange rate is 111 yen to $1. What is the rate of return you earned on the Japanese..
Unfortunately, the Capital Investment Committee refused to approve your recommendation (Problem 1) since you did not consider the uncertainty inherent in these types of investments. Normal distribution (mean of $10,000, standard deviation of $3,000) ..
Inflation, recession, and high interest rates are economic events that are best characterized as being-systematic risk factors that can be diversified away. company-specific risk factors that can be diversified away. among the factors that are respon..
Order these options in increasing value, and give an explanation.
The Florida lottery agrees to pay the winner $284,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.08?
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