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Gizmo Inc has outstanding 10-year bonds with a 13% coupon rate, annual payments selling for $1,056.50. stock selling for $125 and pays a fixed dividend of $20. Gizmo common stock is selling for $100 and has a beta of The last dividend paid was $10 and dividends are expected to grow at 9.09% a year. The current capital structure based on market values is 20% debt, 10% Preferred Stock, and 70% Common Equity. The target capital structure is 50% debt and 50% common equity. What is the weighted average cost of capital for the project?
Eccles Inc., a zero growth firm, has an expected EBIT of $120,000 and a corporate tax rate of 35%. Eccles uses $500,000 of 12% debt, and the cost of equity to an unleveled firm in the same risk class is 16%. What is the firm's cost of equity?
Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. What is the incremental cost of going outside versus conducting the survey as in the past?
A hedge fund with net asset value of $80 per share currently has a high water mark of $88. Suppose it is January 1, the standard deviation of the fund’s annual returns is 49%, and the risk-free rate is 5%. The fund has an incentive fee of 15%. What i..
Mr.Fernandez has applied for a revolving credit line of $6 million to assist in marketing a new product line. The terms of the loan will be as follows: The loan officer estimates that mr.fernandez will use about 60 percent of the credit line on avera..
Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. Exxon is willing to pay $106 per barrel because they can sell the oil in advance to oil refineries. For..
A stock has had the following year-end prices and dividends: What are the arithmetic and geometric returns for the stock?
You own a portfolio of investment in two stocks, A and B. Total investment in stock A is valued at $6,500 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. Total investment in stock B is $3,500. What is the ex..
What is the value of any productive asset based on (equal to)? What cost figure should Wal-Smart Technology use as the relevant cost of the new plant?
Folic Acid Inc., has $20 million in earnings, pays $2.75 million in interest to bondholders, and $1.80 million in dividends to preferred shareholders. What are the common shareholders’ residual claims to earnings? What are the common shareholders’ le..
Starbucks is planning to open a new store across from the student union. Annual revenues are expected to be $5 million. However, opening the new location will cause annual revenues to drop by $3 million at Starbucks’ existing stadium location. The re..
Investment Return MedTech Corp stock was $51.75 per share at the end of last year. Since then, it paid a $1.25 per share dividend. The stock price is currently $63.30. If you owned 400 shares of MedTech, what was your percent return?
Suppose that there are two securities RAIN and SUN. RAIN pays $100 in there is any rain during the next world cup soccer final. SUN pays $100 in there is no rain. Suppose that the world cup soccer final is 1 year from today (although this is not true..
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