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Suppose your company needs $17 million to build a new assembly line. Your target debt−equity ratio is .65. The flotation cost for new equity is 6 percent, but the flotation cost for debt is only 3 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.
a. What is your company’s weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the true cost of building the new assembly line after taking flotation costs into account? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
The balance sheet for Schultz Bone Company.- Calculate Return on assets, Return on total equity, Return on common equity and Times interest earned.
Which of the is NOT a reason that that large firms are increasingly choosing to self fund their health plans:
In the report center under customers & receivables all of the following sections are included except:
Calculate the net present value of the loan excluding flotation costs. Calculate the net present value of the loan including flotation costs.
Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $2,400,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, How large a sales increase can the..
Optimal marginal tax rate should depend on the distribution of ability? The optimal extent of redistribution rises with wage inequality.
Assuming you could earn 6 percent annually, compute the present value of each alternative:
Determine the outcome of a futures hedge if on February 28 the spot rate was $0.7207 and the futures rate was $0.7220.
The market price of a share of common stock at the time of issuance was $19.50, while the market price of a preferred share of stock at the time of issuance was $32. The company paid $12.50 for its treasury stock. Fill in the missing stockholders' eq..
The average price earnings ratio of firms in the hardware industry is 12. A firm that manufactures hammers had earnings per share last year of $1.75. According to the P/E multiples approach to valuing a share of stock, the price per share for the ham..
The risk-free rate of return is 4% while the market rate of return is 11%. Delta Company has a historical beta of 1.25. Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company. The new beta is 1.38. ..
Tall Trees, Inc. is using the modified internal rate of return (MIRR) when evaluating projects. The company is able to reinvest cash flows received from the project at an annual rate of 14.23npercent. What is the MIRR of a project if the initial cost..
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