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WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 15%. New common stock in an amount up to $7 million would have a cost of re = 18%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 11%, and an additional $3 million of debt at rd = 14%. The CFO estimates that a proposed expansion would require an investment of $11.1 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.
A Treasury bill that settles on May 18, 2012, pays $100,000 on August 21, 2012. Assuming a discount rate of 1.87 percent, what is the price and bond equivalent yield?
What is the importance of optimal capital structure? Should a company base its optimal capital structure on the book value, market values or target values? What is recommended for Nike's optimal capital structure and why?
Star Light & Power increases its dividend 2.9 percent per year every year. This utility is valued using a discount rate of 9 percent, and the stock currently sells for $52 per share. If you buy a share of stock today and hold on to it for at least th..
Prepare an advertisement for that position that complies with federal law. This advertisement must be detailed. The minimum length of your job description must be 300 words (approximately three-fourths of a page).
To induce investors to buy futures contracts, a risk premium of $4 is required. To store the commodity for the life of the futures contract would cost $5.50. Find the futures price.
Oxygen Optimization stock is expected to be priced at 70.15 dollars in 1 year and pay a dividend of 3.74 dollars in 1 year. The stock has a risk premium of 13.69 percent, the risk-free rate is 6.63 percent, and inflation is expected to be 4.9 percent..
Build an AR model for the series and check the fitted model. - Build an MA model for the series and check the fitted model.
You believe you will need to have saved 500,000$ by the time you retire in 40 years in order to live comfortably. if the interest rate is 6% per year, how much must you save each year to meet your retirement goal? a couple thinking about retirement d..
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $8.2 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent fac..
A stock is expected to pay the following dividends: $1.30 4 years from now, $1.60 5 years from now, and $1.90 6 years from now, followed by growth in the dividend of 8% per year forever after that point. There will be no dividends prior to year 4. Th..
Of the following efficient market hypotheses, which one has research generally indicated is not correct? 1. weak 2. Semi Strong 3. strong 4. two of the options
[Extra Credit] The difference between an entity's Assets and Liabilities is its ____. [Extra Credit] The regional Federal Reserve banks influence the conduct of monetary policy by _____.
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