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Craig company has a market value of $100M, consisting of 1M shares selling for $50 per share and $50M of 10% perpetual bonds now selling at par.The company's EBIT is $13.4M and its tax rate is 15%. The company can change its capital structure either by increasing its debts to 70% (based on market values) or decreasing it to 30%. If it decisdes to increase its use of leverage, it must call its bonds and issue new ones with a 12% coupon. If it decides to decrease its leverage, it will call its old bomds and replace them with new 8% coupon bonds. The company will sell or purchase stock at the new equilibrium price to complete the the capital structure change. The firm pays out all earnings as dividends; hence its stock is zero-growth stock. Its current cost of equity, r-s, is 14%. If it increases leverage, r-s will be 16%. If it decreases leverage, r-s will be 13%. What is the firm's WACC and total corporate value under each capital structure?
Calculate the discrete monthly rates of returns. Using the monthly returns, calculate the arithmetic mean monthly return and the geometric mean monthly return of each series for the overall period. Convert the mean returns to annualised returns.
What types of decisions would need to be made before the investment is made? Indicate the main kinds of information required to estimate this capital investment project.
Consider a 6-year coupon bond with 4% annual coupons and a $1,000 face value. How much will the price of the bond change if its yield to maturity decreases from 7% to 6%? What is the percentage change in the price?
Karl believes that he could invest his redundancy lump sum at 5% per annum and therefore suggests that you use 5% as the after tax discount rate for a discounted cash flow analysis.
A production corporation produces and sells 40,000 units of a single product. Variable costs total $80,000 & fixed costs total $120,000. If unit is sold for dollar 8,
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Discuss and explain about an appropriate promotions strategy for the groups listed above. In doing so compare & contrast two (2) promotions strategies.
Discuss what pure expectations theory would imply about yield curve. Evaluate and contrast yields & maturities for each of securities.
Preparation of journal entry to establish the petty cash fund and Janet's Spa decided to establish and maintain a petty cash fund of $800 in April. During the month the following happened.
Wheel Industries is planning a 3-year expansion project. The project requires an initial investment of $1.5 million. The project will use straight line depreciation method.
Evaluate Leverage keeping the short-term debt as part of total debt
You get small business loan in the amount of 50,000 is the value you require to buy the restaurant location. After researching banks to find the best interest rate.
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