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Company Z has perpetual annual EBIT equal to $100 million; a corporate tax rate of 35 percent, outstanding debt with market value $200 million; cost of debt equal to 7 percent; and unlevered cost of capital equal to 12 percent. (Assume the world of MM with taxes.)
a. What is the total value of the equity in this firm?
b. What is the required return on the (levered) equity?
c. What is the WACC?
Why do you think investors have been pouring money into mutual funds and exchange-traded funds rather than individual stocks?
Let and be the returns for two securities with = 0.03 and ) = 0.08, Var() = 0.02, Var() = 0.05, and Cov(, ) = -0.01. Plot the set of feasible mean-variance combinations of return, assuming that the two securities above are the only investment vehicle..
Stock A's beta is 1.7 and Stock B's beta is 0.7. Which of the following statements must be true about these securities? (Assume market equilibrium.)
What role do security from physical harm and the preservation of other inviolable human rights play in creating a positive peace?
Make a graph with the change in the interest rate on the horizontal axis and the percentage change in stock prices on the vertical axis.
Suppose that TapDance, Inc.’s, capital structure features 70 percent equity, 30 percent debt, and that its before-tax cost of debt is 10 percent, while its cost of equity is 15 percent. Assume the appropriate weighted average tax rate is 34 percent. ..
You plan to buy the house of your dreams in 18 years. You have estimated that the price of the house will be $60,619 at that time.
what would be the target mortgage payment given that they have an auto loan payment of $325/month and a student loan of $300/month?
Rollins Corporation is estimating its WACC. Calculate the cost of existing debt. Calculate the cost of new debt.
What is the current yield on the bond? What is the yield to maturity if interest is paid semiannually?
Ingenta Bank has securitized a pool of 500 interest only mortgages with and average principal of 450,000 each and 30 years to maturity. The mortgage pool pays an aggregate coupon of 3.42%. Ingenta bank sells the pool to an SPV who collects an annual ..
What is the bond's nominal (annual) coupon interest rate?
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