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A company has $89 million in outstanding bonds, and 10 million shares of stock currently trading at $38 per share. The bonds pay an annual coupon rate of 9% and is trading at par. The company's beta is 0.9, its tax rate is 40%, the risk-free rate is 4%, and the market risk premium is 4%. What is this firm's WACC?
Twice Shy Industries has a debt−equity ratio of 1.3. Its WACC is 7.1 percent, and its cost of debt is 6.6 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capi..
Income tax savings for the current year on this equipment will therefore amount to:
For Stock A, the cash dividend expected one year from now is $9 [D1]. The dividends are expected to grow at a constant rate of 4% per year for ever. The required rate of return the common stock is 16%. Then calculate the current price of the stock us..
Which of the following is not a correct statement about financial statements? “Assets = Liabilities + Equity” is called accounting equation. Assets are resources owned by a firm. Liabilities are claims owed to outsiders (creditors) against a firm’s a..
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $498,000 is estimated to result in $197,000 in annual pretax cost savings. Should the company buy and install the machine press?
A company has 1,000 shareholders who own a total of one million shares of its common stock currently selling at $7 per share. The company earned $11,000,000 after taxes. The annual dividend is $.80 per share. The firm has assets of $137,000,000 and l..
What is the expected profit of granting credit? Should Cast Iron grant or refuse credit? What is the break-even probability of collection?
One year ago, you sold a put option on 100,000 euros with an expiration date of one year. You received a premium on the put option of $.04 per unit. The exercise price was $1.22. Determine the total dollar amount of your profit or loss from your posi..
The Sampsons learn that many corporate bonds have recently been downgraded due to questionable financial statements. - Explain the possible impact of a downgrade of the corporate bond to the Sampsons, given their financial goals.
Gillian Stationary Corporation needs to raise 600,000 to improve its manufacturing plant. It has decided to issue a 1000 par value bond with an annual percentage rate of 8.0 percent with interest paid semi annually and a 10 year maturity. Investors r..
How much additional 10 percent debt can the company issue now and maintain its times interest earned ratio at 3.5?
The Yo-Yo Corporation tries to determine the appropriate cost for retained earnings to be used in capital budgeting analysis. The firm’s beta is 1.80. The rate on six-month T-bills is 2.30%, and the return on the S&P 500 index is 5.01%. What is the a..
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