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A company is looking to invest in new machinery. The current financing is 40% debt, 40% common stock, and 20% preferred stock. The company anticipates the new debt issue will consist of 15-year $1,000 face-value bonds that will be priced at par. The bonds will pay an annual coupon of $75. Flotation costs for this new bond issue will be $15 per bond. The company has recently paid a dividend of $3.50 and is expecting to increase the dividend by 5% per year, indefinitely. The current share price for the company’s common stock is $32. The company also plans to issue preferred stock that will pay a dividend per share of $7 per year in perpetuity. The market price of the preferred stock will be $60. The flotation costs of both the common stock issue and preferred stock issue will be $2.50 per share. If the company’s marginal tax rate is 39%, then what is the Weighted Average Cost of Capital for this company?
A) 13.84%
B) 9.95%
C) 12.55%
D) 11.29%
Martin’s Yachts has paid annual dividends of $1.40, $1.75, and $2.00 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to rema..
Shares of SoHot Donuts common stock are currently selling for $15. Next year’s dividend is expected to be $1.50 per share and the market rate of return is 13%. At what rate is the dividend projected to be growing?
How does a bond issuer decide on the appropiate coupon rate to set on bonds? Explain the difference between the coupon rate and the required rate of return on the bond. No plagirism please and include any references if you used them
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $46,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 30% of revenues ..
Use the information below to estimate the expected retur on the stock of Bieber Corporation. Long run average stock return-Current T-bill return
Create SML graph that needs to be computer generated either through excel or any other program, reflecting a risk-free rate of 2% and the market return 7%. C. Required rate of return needs to be on the Y axis and the beta needs to be on the X axis
Federal employment, as a percentage of all employment, began to decline in the 1970s. To know whether this signaled a philosophical move toward smaller government, what additional information would you want?
Express the simple returns in percentages. Compute the sample mean, standard deviation, skewness, excess kurtosis, minimum, and maximum of the percentage simple returns.
An investor plans to invest 75 percent of her funds in the common stock of Gamma Industries and 25 percent in Epsilon Company. The expected return on Gamma is 12 percent and the expected return on Epsilon is 16 percent. The standard deviation of retu..
a 16 debenture of r5 000 is redeemable at a premium of 10 after 5 years. the fair rate of return on similar debentures
Debt: 5,000 5 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 125,000 shares outstanding, selling for $62 per share; the beta is 1.2. Preferre..
However, when it does this, the firm wants the stock price increased to at least twice its preferred minimum as it is concerned the price will fall further. Which one of the following stock split ratios is most appropriate for this situation?
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