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Alternatively, Wicker can sell 8.5 percent coupon bonds with a 2-year maturity and $1,000 par value at a price of $973.97. How many percentage points lower is the interest rate on the less expensive
The last dividend paid by ABC Company was $2.00. ABC's growth rate is expected to be a constant 4 percent. ABC's required rate of return on equity (ks) is 9 percent. What is the current price of ABC
What is the possible meaning of the changes in stock price for GEICO and Berkshire Hathaway on the day of the acquisition announcement?
O'brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $850. Wha
Describe the risks associated with the introduction of the new product and the financial impact that these risks may have.
The Preston Toy Co has warrants outstanding that allow the holder to purchase a share of stock for $22. (exercise price) The common stock is currently selling for $28, while the warrant is selling
Today's closing price of a bond, with the par value of $1,000.00 and 8% coupon rate, was listed as 103.50. The information also indicates that today's price was 7.20 higher then yesterday. Based on
In the previous problem you were asked to find the expected NPV of a project TWI is considering. Use the same data to calculate the project's coefficient of variation.
Thomas Brothers is expected to pay a $.50 per share dividend at the end of the year ( so D1 = $0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on
Eastern's post-merger beta is estimated to be 2.0, and its post-merger tax rate would be 34%. The risk-free rate is 8%, and the market risk premium is 4%. What is the appropriate discount rate for
The Rich Corporation has $150 million worth of common stock on which investors require a 17% rate of return. It has $35 million in bonds that offer a 7% return. Calculate the WACC for Rich Corporati
The cost of a new machine is $70,000 plus an additional $8,000 for freight and setup costs. The old machine that is being replaced has a book value of $15,000 and can be sold for $7,000. An investm
Stockholders are surprised to learn that the firm has invested $43 million in a project that has an expected payoff of $8 million per year for six years. The project's cost of capital is 12%.
You have a chance to make a $70,000 one-year investment. The investment is expected to earn 15%, and there are no taxes. If you borrow $45,000 at 9% and put up the other $25,000 with your own money,
Eschevarria Research has the capital structure given here. If Eschevarria's tax rate is 30%, what is its WACC?
Frequent changes in engine technology make engine development risky, but Pinkerton feels that the basic designs can be refined and modified. Thus, Pinkerton often assumes that continuous replacemen
What is Dozier's terminal, or horizon value? What is the current value of operations for Dozier? Suppose Dozier has $10 million in marketable securities, $100 million in debt and 10 million shares of
Since the basic rationale for any operating merger is synergy, in planning such mergers, the development of accurate pro forma cash flows is the single most important aspect of the analysis.
Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for $60.00 per share. The firm's dividend for next year is expected to be $5.30 with an annual growth
What is the days' sales outstanding? What is the average amount of receivables? What is the percentage cost of trade credit to customers who take the discount and to those who do not take it?
What is the maximum potential profit of your strategy? If, at expiration, the price of a share of IBM stock is $103, what would your profit be? What is the maximum loss you could suffer from your stra
Pearl Inc., is expected to maintain a constant 6.3 percent growth rate in its dividends, indefinitely. If the companyhas a dividend yield of 3.4 percent what is the required return on the company's
An investment project requires an outlay of $100,000, and is expected to generate annual cash inflows of $28,000 for the next 5 years. The cost of capital is 12 percent. How do I find the NPV and t