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Droz's Hiking Gear Company has found that its common equity shares have a beta equal to 1.50 while the risk-free return is 12 percent and the market risk premium is 6 percent. It has 10-year bonds outstanding with a market price of $1,000, a face value of $1,000, and an annual coupon rate of 15 percent. The total market value (debt plus equity) of the firm is $20,000,000. What is the market value of the firm's debt if the firm's WACC is 18 percent and the firm is subject to a 40 percent marginal tax rate?
Assume that your opportunity cost of capital is 7% per year. At what rate of capital appreciation would the NPV be zero if you resold the house after 1 year?
Reversing Rapid Co. Purchases an asset for $183552. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a..
Units Sold Total Variable Costs Fixed Costs Total Costs Total Revenue Operating Income (Loss). Compute the degree of operating leverage (DOL) based on the formula below. (Do not round intermediate calculations. Round your final answer to 2 decimal pl..
A seminar series has set up costs of $3,000; a rent per event of $1,000; plus a variable cost of $30 per attendee for food, supplies, and refreshments. The price of the seminar admission is $100 per person. What is the break even in a) units {people}..
A firm uses only debt and equity in its capital structure. The firm's weight of equity is 70 percent. The firm's cost of equity is 13 percent and it has a tax rate of 30 percent. If the firm's WACC is 11 percent, what is the firm's before-tax cost of..
The following are three one year "discount" loans that a bank might offer to the customer. Determine the amount of interest the bank would make on each loan and indicate the amont of net proceeds that the bank would pay our on each loan. On which loa..
Explain why bank managers often refuse to sell securities at a loss relative to book value. What is the cost of continuing to hold discount instruments? What are the costs of selling securities at a gain?
Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 16 years to maturity that is quoted at 103 percent of face value. The issue makes semiannual payments and has an embedded cost of 11 percent annually. W..
United Air has a 8.7% coupon 20 year bond (par value = $1,000). Assume that coupon payments are semi-annual and that the current price is $980.50. What is the yield-to-maturity of this bond? Be sure to report on an annualized basis
A bond has a coupon rate of 12 percent and 14 years until maturity. If the yield to maturity is 9.3 percent, what is the price of the bond?
You just won the magazine sweepstakes and opted to take unending payments. The first payment will be $35,000 and will be paid one year from today. Every year thereafter, the payments will increase by 2% annually. What is the present value of your pri..
Draw a diagram showing the variation of an investor's profit and loss with the terminal stock price for a portfolio consisting of One share and a short position in one call option.
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