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In optimal capital allocation process the company capital budgeting is the most determinate factor. Leveraged company always considers capital structure that would produce list weighted average cost of capital. Therefore the META BEER FACTORY manager detriment to source it capital in the following manner. 54% from Debt, 34 percent from Preferred stock and 12 percent from common stock (retained earnings). Addition to retained earnings at the end of last year was $ 124 million. The company is well structured one and he can access preferred stock from a company paid dividend at a price of 12 per share and now selling at open market at $93.00. The company borrowed new debt with 12% interest rate. The marginal tax prevalent is 40%. Besides this the company determines to reinvest dividend from existing shareholders. This stock risk free return is 8% and expected return is 14%. This family of common stock has significant risk level is 0.65. The company considers market risk to value common stock price. Considering all relevant factors:
A. What is the weighted average cost of capital?
B. What is the retained earning breakpoint?
You can earn 5% on average over the next 30 years. How much do you have to save each month to reach your goal.
During the year the share pays dividends totalling $1.78. What was the dividend yield on this investment?
In the bond market, these bonds are selling at $900 each. If your required rate of return is 8%, would you buy one of these bonds?
What does an increase in accounts payable imply? How would this increase in accounts payable be reported under the indirect method?
Your best taxable investment opportunity has an EAR of 4%. You best tax-free investment opportunity has an EAR of 3%. If your tax rate is 30%, which opportunity provides the higher after-tax interest rate?
Why do capital expenditures increase assets while other cash outflows, like paying salary, taxes, etc., do not create any asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings? Explain in ..
Capital budgeting techniques are used in Financial performance evaluation. How do we use these techniques (NPV, Payback, IRR, PI, etc) in a business plan?
Another company is in the process of determining its WACC. For this problem you will need to use the CAPM to calculate your answer.
We will need to spend 4000 on new parts and lubricants to keep it running smoothly. The machine is 3 year MACRS class. Find the year two depreciation.
If you were the management consultant, how would you demonstrate the benefit of a new stock control system to Mr Templar?
What is the reduction in outstanding cash balances as a result of implementing the lockbox system?
If you know that the risk-free rate is 4.7% and the expected market risk premium is 5.3%, what would be the expected return of a stock with a beta of 1.4 using
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