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A firm with the rating AA plans to issue one million shares of a 4 year-10% bond with face value $100. After the financial crisis this firm is downgraded to a B rating. The risk free rate is 1.5%. The default spreads are given in the table below.
What is the initial amount (before downgrading) the firm wants to raise?
Rating Default spreadAAA 0.35%AA 0.50%A+ 0.70%A 0.85%A- 1.00%BBB 1.50%BB+ 2.00%BB 2.50%B+ 3.25%B 4.00%B- 6.00%CCC 8.00%CC 10.00%C 12.00%D 20.00%
Using Rule of 72. In 1967, tuition, room, and board at a private college costs $3000. In 2007, the same services cost $48,000. Find the average annual rate of college-cost inflation, using the Rule of 72.
Feeback Corporation stock currently sells for $32 per share. The market requires a return of 11.8 percent on the firm's stock. If the company maintains a constant 3.9 percent growth rate in dividends, what was the most recent dividend per share pa..
Is it appropriate to divide all risk into Idiosyncratic and Systematic? Can you think of possible subdivisions of Systematic Risk?
Moniker Manufacturing's bonds were recently issued at their $1,000 par value. At any time prior to maturity (20 years from now), a bond holder can exchange a bond for a share of common stock at a conversion price of $44. What is the conversion rat..
The expiration date of the options are six months from now. The risk free interest rate is 5% per annum. What is the fair price for this portfoilio. Why?
The Hughes firm is involved in a competitive bidding situation. Variable costs related to the project total $290,000. and allocated fixed overhead is $95,000.
What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?
what is the net present values assumption about how cash flows are re-invested?
How much will you have when the bond is retired after twelve years? What was the annual return you earned on this investment?
Calculate Johnson's debt ratio assuming the firm uses only debt and common equity. Round your answer to two decimal places.
Chester Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. How much will the company pay in separation costs if each worker receives $5,000 when separated?
Other information: risk free rate = 4.0%, the market risk premium = 6.5%, tax rate = 40.0%. Using the average of the CAPM and DCF estimates, find the required return on equity.
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