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Makai Metals Corporation has 8.2 million shares of common stock outstanding and 260,000 4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.1, and the bonds have 10 years to maturity and sell for 110 percent of par. The market risk premium is 7 percent, T-bills are yielding 3 percent, and the company’s tax rate is 38 percent. a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Market value weight Debt Equity b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Discount rate %
When originally issued, the bonds were sold for $960 per bond; today their current market price is $1,065 per bond and company pays a semi-annual interest of $45 per bond. If an investor purchases a bond 10 years ago when the bond was first issued an..
Calculate the yield on the repo if it has a 4-day maturity. Calculate the yield on the repo if it has a 12-day maturity.
Using the Capital Asset Pricing Model, determine the required rate of return on the following 2-stock portfolio given the following market and stock data: Risk-free rate of return = 4% Market rate of return (return on an average risk security)= 9% St..
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Frank’s is analyzing a 6-year project that requires $578,000 in equipment to start the project. This cost will be depreciated on a straight-line basis to a zero book value over the life of the project. The project will reduce the firm’s inventory by ..
The internal rate of return:
Suppose you purchase eleven put contracts on Testaburger Co. The strike price is $40, and the premium is $2.50. If, at expiration, the stock is selling for $32 per share, what are your put options worth? What is your net profit?
Imagine a close friend asks you if they should attempt to manage their own portfolio or hire someone to help them. Share the pros and cons of both as well as at least one resource (book, article, video, etc.) that can help them decide.
Which of the following conclusions would be true if you earn a higher rate of return on your investments? Select one: The greater the present value would be for any lump sum you would receive in the future. The greater the present value would be for ..
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A firm has total assets of $150 million, liabilities of $90 million, and a return on assets of 8%. What is the return on equity? A company’s stock is trading at $35 a share. The company has a P/E ratio of 16, and pays $0.30 in dividends per share. Wh..
What is your one best guess as to the value of the bond?
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