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A company is thinking about investing in a new project. The balance sheet reports that they currently have $42 million worth of long-term debt and $24 million worth of common equity. They also have 1.2 million shares of stock outstanding and the stock currently trades for $35 per share. They have no preferred stock. What is the weight of equity in the company s capital structure? 50.00% 36.36% 38.89% 63.64% None of the above
Suppose Acap Corporation will pay a dividend of $2.73 per share at the end of this year and $3.06 per share next year. You expect Acap’s stock price to be $53.83 in two years. Assume that Acap’s equity cost of capital is 8.6%. What price would you be..
Someone in a heavier tax bracket, but paying the same interest rate as someone else, might be better off as the after tax rate could/would be lower. Can you think of a circumstance this might happen in? Perhaps an industry which this is more likely t..
Oil Well Supply offers a 6 percent coupon bond with semiannual payments and a yield to maturity of 6.73 percent. The bonds mature in 8 years. What is the market price per bond if the face value is $1,000?
Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 24% for two years and then at 5% thereafter. If the required return for Deployment Specialists is 9.5%, what is the intrinsic value of Deployment Specialists sto..
A 12-year bond has an annual coupon rate of 8%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity rate of 10%. The bond is currently selling at a price above its par value. If market interest rates decline, th..
Undecided voters are likely to vote for the candidate they think is most likely to win. What is this phenomenon called? Why might some argue that news stations ought to stick to reporting what is actually happening on Election Day rather than making ..
Woidtke Manufacturing's stock currently sells for $30 a share. The stock just paid a dividend of $4.00 a share (i.e., D0 = $4.00), and the dividend is expected to grow forever at a constant rate of 10% a year. What stock price is expected 1 year from..
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $31,000 for one year. The interest rate is 13.6 percent. You and the lender agree that the interes..
Finance, R&D, purchasing and manufacturing are all activities of which of the following elements:
On April 1, 2014, West Company purchased $450,000 of 6.00% bonds for $467,750 plus accrued interest as an available-for sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2019. Prepare the journal entry on April 1..
You are a portfolio manager who has just discovered the possibilities of stock-index futures. Assume that you have the resources to buy and hold the stocks in the S&P 500. Any day between February 24 and March 1, obtain the current level of the S&P 5..
On your 30th birthday, you decide to open an individual retirement account (IRA) and deposit $500. You continue to make monthly deposit of $500 each until your 45th birthday (your last deposit of $500 will be made on your 45th birthday). How much tot..
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