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Bruce & Co. expects its EBIT to be $58,000 every year forever. The company can borrow at 9 percent. The company currently has no debt, and its cost of equity is 12 percent.
If the tax rate is 35 percent, what is the value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of the company $
What will the value be if the company borrows $180,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of the comapny $
Dynamic Engineering has 100,000 shares of stock outstanding trading at a price of $85 per share. The firm would prefer to have its stock trade at $17 per share. Which of the following choices would achieve this objective?
What is the price of a bond with a coupon rate of 4.50%, a yield to maturity of 4.25%, a future value of $1000, semi-annual coupon payments, and 9 years until maturity?
There has been a major global crisis, and your company’s board of directors has announced that the company is going bankrupt. No one could have seen this one coming. As your company’s controller, compose a summary report to your CEO advising him on t..
The degree of operating leverage is computed as
You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 40 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are .81, 1.19, 1.20, and 1.37, respectively. What is the portfolio beta?
At the end of each three months Laura puts $200 into an account that pays 4% interest compounded quarterly. After 10 years she discontinues the payments but leaves the total amount in the account to collect interest for 10 more years. Determine the b..
A bond’s credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity of 9.4%. A-rated bonds sell at yields of 9.7%. Assume a 10-year bond with a coupon rate of 8.9% is downgraded by Moody’s from Aa to A rat..
A project costing $6,200 initially should produce cash inflows of $2,860 a year for three years. After the three years, the project will be shut down and will be sold at the end of Year 4 for an estimated net cash amount of $3,300. What is the net pr..
what is a reasonable forecast of the rate on 1-year Treasury securities next year?
Summit Systems has an equity cost of capital of 11.5%, will pay a dividend of $1.25 in one year, and its dividends had been expected to grow by 6% per year. What is the drop in value of a share of Summit Systems stock based on this information? If yo..
Describe in a few short sentences what role derivatives played in the 2008 financial crisis. Give an example of how a derivative may be used to hedge risk and an example of how a derivative may be used as a speculative tool (i.e. just to make a direc..
Wine & Rose Inc. offers a 6 percent coupon bond that has a $1,000 par value, semiannual coupon payments and a yield to maturity of 5.43 percent. The bond matures in 9 years. What is the price of the bond? What will happen to the price if market inter..
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