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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. The firm is in 40% tax bracket. You have estimated the market risk premium to be 6% and yield on 10 year U.S. treasuries is 4%. The CAPM holds.
A. What is the yield to maturity on the firm’s bonds?
B. Using CAPM what is the required rate of return on firm’s equity?
C. What is the firm WACC?
Assume complete specialization, where china produces only toys and France produces only wine. What will be the effect on total production?
question 1a stock price is currently 100. it is known that in one year it will be either 146 or 80. the risk-free rate
If a stock's beta is equal to one, then
Determine the current value of the bond if present market conditions justify a 14 percent required rate of return.
An 6% semi-annual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 6.9105%. What is the bond's price? Round your answer to the nearest cent. What is the bond's YTM?
The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other pla..
Thora is considering buying a BMW bond for $674.205. This bond has a maturity value of $757, maturing in 3 years, with comparable interest rates of 12%, and coupon payments of $43. What should she pay?
Harlan County Mining, a Kentucky-based coal mine, has expected earnings before interest and taxes of $6.2 million. Its unlevered cost of capital is 13 percent and its tax rate is 34 percent. The firm has debt with both a book and a market value of $3..
A stock will pay dividends of $1.20 starting in year 4. The dividends for year 5, year 6, and year 7 will grow by 25%, 20%, and 12%. Finally, the dividends will grow at a constant rate of 6% forever. The required return on the stock is 11%. What shou..
Suppose that prior to a merger the stock price of the target company was $50 and the stock price of the acquiring company was $40. If the acquiring firm agrees to pay 1.5 share of their stock for every share of the target firms stock, then what premi..
A fund of funds divides its money between five hedge funds that earn –5%, 1%, 10%, 15%, and 20% before fees in a particular year. The fund of funds charges 1 plus 10% and the hedge funds charge 2 plus 20%. The hedge funds’ incentive fees are calculat..
netflix swot analysis project1.please read all you can find on netflix from the time of the 2011 debacle over quikster
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