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Type 2D: Here is a book balance sheet for Parker Associates. Figures are in millions.
Assets Liabilities and Shareholders' Equity
Assets (book value) $100 Debt $40
Equity $60
_ _
$100 $100
Unfortunately, the company has fallen on hard times. The 6 million shares are trading for only $5 apiece, and the market value of its debt securities is 50% below the face (book) value. Suppose shareholders now demand a 25% expected rate of return. The bonds are now yielding 15%.
What is the firm's weighted-average cost of capital if the firm's tax rate is 34%?
If the company considers a normal project whose risk is about the same as the company's risk with an internal rate of return of 17%, should it accept the project? Why or why not?
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For fun, locate the notes to the financial statements located in the annual report of any company you choose. Tell us something unusual or important you found.
There is a 5 percent probability of a boom and a 75 percent chance of a normal economy. What is your expected rate of return on this stock?
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A bond's credit rating provides a guide to its price. In early 2012, Aaa bonds yield 5.3% and Baa bonds yield 5.9%. If some bad news causes a five-year bond
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Some advocates have suggested that the United States should move to a universal health care plan paid for at the federal level like Medicare.
Draft a memo to the client to explain the importance of accrual based financial statements, make sure you: explain the difference between a cash basis and an accrual basis measure of performance, describe why, in most cases, accrual basis net income ..
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