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Suppose a company simultaneously sold two long-term debt issued at par value: 6 1/8 percent senior debentures and 6 3/8 percent subordinated debentures. What risk return trade off would an investor
An all-equity business has 100 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a dividend recapitalization (a
How does one calculate the cost of equity using the industry average beta?
Based on the following information calculate the holding period return.
Riordan's default risk premium has been estimated at 2.5%, its liquidity risk premium is about 2%, and its maturity risk premium is 3%. inflation is expected to be 5% in the bond's first year and 3%
According to CAPM, how do you valuate these two stocks? Which one is a better buy?
A stock market analyst is able to identify mispriced stocks by comparing the average price for the last 10 days to the average price for the last 60 days. If this is true, what do you know about the
Explain how a long-term bond's price is impacted in opposite directions when the required rate of return on the bond rise.
ABC is a constant growth firm that just paid a dividend of $1.50, sells for $18.84 per share, and has a growth rate of 8%. Flotation costs on new common stock total 10%, and the firm's marginal tax
Assume a corporation has earnings before depreciation and taxes of $82,000, depreciation of $45,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company.
what is the project's year 0 net cash flow? Year 1? Year 2? Year 3? If the required return is 12 percent, what is the project's NPV?
Would an increase in the volatility of long-term interest rates cause a bond investor to pay more or less for a non-callable bond that had high convexity? Briefly explain your answer.
What are the five Cs of credit? Explian why each is important.
Are stockholders and creditors likely to agree on how much cash a firm should keep on hand?
What are some of the characteristics of a firm with a long operating cycle.
Explain the process to calculate external funding needs and the importance to a business.
Explain how an investor's risk aversion is reflected in a bond's maturity risk premium.
Redo the analysis, but now assume that the debt financing would cost 15 percent. What impact would the new capital structure have on the firm's net income, total dollar return to investors, and ROE?
The standard deviation of stock returns of Park Corporation is 60 percent. The standard deviation of the market return is 20 percent. If the correlation between Park and the market is 0.40, what is
ABC company had a taxable income of $581,229 from operations after all operating costs but before interest charges of $58,390, dividends received of $76,648, dividends paid of $10,000, and income ta
The desreumaux Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year. interest is p
Filkins Farm Equipment needs to raise $4.5 million for expansion. and it Expects that five year zero coupon bonds can be sold at a price of $567.44 for each $1.000 bond.