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A firm has determined itsoptimal capital structure, which is composed of the following sources and target market value proportions:
Long-term debt 30%
Preferred stock 5
Common stock equit 65
Debt: The firm can sell a 20-year, $1000 par value, 9 percent bond for $980. A floatation cost of 2 percent of the face value would be required in addition to the discount of $20.
Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The cost of issuing and selling the stock is $3 per share.
Common Stock: The firm's common stock is currently selling for $40 per share. The divident expected to be paid at the end of the coming year is $5.07. Its divident payments have been growing at a constant rate for the last five years. Five yars ago, the divident was $3.45. It is expected that to sell, a new common stock issue must be underpriced at $1 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm's marginal tax rate is 40 percent.
Calculate the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings.
The tax rate is 34%. If the firm experiences negative earnings before tax, please record $0 as the income tax. If you overpay your estimated taxes, let the liability account go negative.
Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return
You have $5,000 to deposit. Regency Bank offers 15 percent per year compounded monthly (1.25 percent per month), while King Bank offers 15 percent but will only compound annually.
Saunders Corp. has a book net worth of $13,405. Long-term debt is $8,600. Net working capital, other than cash, is $3,235. Fixed assets are $17,780 and current liabilities are $1,790.
the return on the market portfolio is currently 12%. mobile phone corporation stockholders require a rate of return of 30% and the stock has a beta of 3.2. according to capm, DETERMINE THE RISK-FREE RATE.
A company has a total cost of $40.00 per unit at a volume of 120,000 units. The variable cost per unit is $25.00. What would the price be if the company expected a volume of 110,000 units and used a markup of 50%
Miller Brothers is considering a project that will produce cash inflows of $61,500, $72,800, $84,600, and $68,000 a year for the next four years, respectively. What is the internal rate of return if the initial cost of the project is $225,000
To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 86,000 shares of common stock.
A six-month $10,000 Treasury bill is selling for $9,844. What is the annual yield according to the discount method. Does this yield understate or overstate the true annual yield
Clive has a total of $411,016 in his retirement savings and has the funds invested such that he expects to earn an average of 7.10%, compounded monthly, on this money throughout his retirement years.
A firm with $49,000 in fixed costs breaks even on unit sales of 7,000, how many units must the firm sell to earn $30,000 in operating profit
The common stock currently sells for $37 per share and has a beta of 1.45, and the bonds have 15 years to maturity and sell for 118 percent of par. The market risk premium is 7.7 percent, T-bills are yielding 4 percent,
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