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Tobacco Company of America is a very stable billion-dollar company with sales growth of about 5 percent per year in good or bad economic conditions. Because of this stability (a correlation coefficient with the economy of +.3 and a standard deviation of sales of about 5 percent from the mean), Mr. Weed, the vice-president of finance, thinks the company could absorb some small risky company that could add quite a bit of return without increasing the company's risk very much. He is trying to decide which of the two companies he will buy. Tobacco Company of America's cost of capital is 10 percent.
Incremental expenses of the system include two new operators with annual salaries of $40,000 each and operating expenses of $12,000 per year. The firms' tax rate is 34 percent.
Computation of bond's coupon interest rate and What is the bond's annual coupon interest rate
The company needs a cash infusion of $1.2 million, and it can issue debt with an interest rate of 8 percent. Assume there are no corporate taxes.
The statement of changes in retained earnings for the year shows:
Ae, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 8 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has a coupon rate of 8 percent annually.
If the required return is 10 percent, what is the price of the stock today?
Sales for Triad Inc. have grown from $2 million to $8.092 million in 10 years. What is the implied growth rate of sales for Triad?
The expected return on the Market Portfolio M is E(rM)=15%, the standard deviation is ?M=25% and the risk-free rate is rf=5%. The CAPM is assumed to hold.
Objective type questions on Capital Budgeting and stocks and explain Cause surpluses and shortages in markets respectively
During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new investments.
Jacob has an opportunity to invest in new retail development in his building. The initial investment is $50,000 & expected cash-flows are as follows: Year 1: $2,500 Year 2:
Identify and describe the fundamental components of a telecommunications system.
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