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Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 4.6% bonds outstanding. Assume that (1) all of the MM assumptions are met, (2) there are no corporate or personal taxes, (3) EBIT is $1.7 million, and (4) the cost of equity to Company U is 10.1%.
What is the required percentage rate of return of equity for Company L?
discuss the following topicdoes purchasing power parity ppp eliminate concerns about long-term exchange rate risk? one
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $84,000 per year for the next two years, or you can have $73,000 per year for the next two years, along wi..
A project has the following estimated data: price = $89 per unit; variable costs = $33.82 per unit; fixed costs = $5,100; required return = 10 percent; initial investment = $11,000; life = seven years. Ignore the effect of taxes. What is the financia..
Lambardi Company sells 3 types of bags. Bag A sells for $17 and has variable cost of $9.00 per unit. Bag B sells for $12 and has variable cost of $12.00 per unit. What is the weighted average contribution margin per unit for Lambardi?
After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years..
Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of t..
FHC Inc., a U.S. corporation, has an account payable due in 90 days. Use the following information to evaluate the optimal strategy of hedging its transactional exposure - MMHC Inc., a U.S. corporation, has an Euro-denominated account receivable i..
Team B Jake's Sound Systems has 390,000 shares of common stock outstanding at a market price of $31 a share. Its beta is 0.8. Market expected return is 13% and risk-free rate is 6%. Jake's also has 7,700 bonds outstanding with a face value of $1,000 ..
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a local brokerage firm and her boss is selling securities that call for 4 payments of $50 (1payment at the end of each of the next 4 years) plus an extra paymen..
Fernardo bank has interest expense of 150 million, earning assets of 1,400 million and a net interest margin of 5.00%. The bank also has interest bearing liabilities of 1,100 million. what is Fernando Bank spread?
A Carlyle chemical is evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the projects cash flow. what recom..
Which of the following activities will affect a bank's required reserves? a. The local Girl Scout troop collects coins and currency to buy a new camping stove. The troop deposits $ 250 in coins and opens a small time deposit. b. You decide to move $ ..
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