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Johnson Inc has 2,000 bonds and 300,000 shares of common stock outstanding. The common stock has a beta of 1.3 and trades at $18 per share . The bonds are $1,000 face value with a 5% coupon rate, paid semi-annually, and currently trade at $985. 8 years to maturity with a YTM of 5.24%. The firm is in 40% tax bracket. The market risk premium is 6% and yield on 10 year U.S. treasuries is 4%. The CAPM holds. Using CAPM what is the required rate of return on firm's equity?
Jamie and Peter Dawson own 220 shares of Duke Energy Common stock. Duke energy's quarterly dividend is $0.28 per share. What is the amount of the dividend check the Dawson couple will receive for this quarter?
A firm recently purchased a new facility costing $984 thousand. The firm financed this purchase with an amortized loan at an interest rate of 8.8 percent APR, with monthly payments of $23.9 thousand. How long will it take to pay off this loan?
You deposit a sum of $10,000 today in your bank safe deposit box and leave it there. You learn nothing in your bank account as the money is sitting inside the safe deposit box. Assumes that inflation rate is running at 14% a year. How much will your ..
You want to earn the equivalent of $3500 per month over the expected 25 years of your retirement. You plan to retire in 40 years and can earn 12% on your savings till retirement and 8% on the retirement fund once you retire. How much will you have to..
Scanlin, Inc., is considering a project that will result in initial after tax cash savings of $1.70 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the c..
Woidtke Manufacturing's stock currently sells for $32 a share. The stock just paid a dividend of $2.25 a share (i.e., D0 = $2.25), and the dividend is expected to grow forever at a constant rate of 4% a year. What stock price is expected 1 year from ..
Railway Cabooses just paid its annual dividend of $4.10 per share. The company has been reducing the dividends by 12.5 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 14 pe..
Birds of a Feather have 10-year bonds outstanding that carry an annual coupon of 8 percent. The bonds mature in 7 years and are currently priced at 110 percent of face value. What is the firm's pretax cost of debt?
You borrowed $45 from a friend and after ten months repaid $50.. What monthly interest rate did you pay? (xx.xx%) What nominal annual interest rate did you pay? (xx.xx%) What was the annual effective rate?
Dominique has just turned 58 and she has deposited her annual payment of $20,000 into her retirement account. She made her first such saving deposit into this fund on her 34th birthday.
Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years. The salvage value of the ambulance will be $25,000. Assume the ambulance is sold at the end of year..
Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company’s dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What..
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