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A levered firm L in the same business risk class has a debt or equity ratio of 1. Use the M&M Propositions to calculate the After-tax cost of equity for firms U & L
A company has a capital structure of 40 percent equity & 60% debt. Equity beta is 1.2; the Weighted Average Asset Betas of five other companies are 0.9.
Estimate the rational for wealth maximization as a goal for a firm and Discuss the advantages and disadvantages of dividend policy?
The WACC is a weighted average of the costs of debt, preferred stock, & common equity. Would the WACC be different if the equity for the coming year will all come in the form of retained earnings
Assume a firm estimates its WACC to be ten percent. Should the WACC be used to estimate all of its potential projects, even if they vary in risk? If not, what might be “reasonable” c
Suppose that the risk free rate increases. What impact would this have on the cost of debt? What impact would it have on the cost of equity?
Copernicus, Inc. has determined that its target capital structure will be 60% debt, 10 percent preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the compan
What does a company's cost of capital represent and how is it calculated? How do market prices and the company's perceived market risk impact its cost of capital, & how does the company's debt to
George Industries needs to raise 25 million dollar to fund a new office complex. The company plans on issuing 10 year bonds with a face value of $1000 and a coupon rate of 7.0% (yearly payments).
You have recently been employed by Doff Computer, Inc. (DCI), in the finance area. DCI was founded 8 years before by Chris Doff and currently operates 74 stores in the Southeast.
Suppose that you own 600 shares of common stock of a company, that you have been receiving dividends of 6 dollar per share per year, & that the company has a 4 for three stock splits.
he supply curve for bonds to shift left because corporations will borrow less due to decreased profitability when the government is in debt.
Estimate the effect on the accounting equation of the payment of interest and the amortization of premium on December 31, 2009 (the third year), and estimate the balance sheet presentation of the bond
A stock is expected to pay a dividend of 1 dollar per share in two months and in five months. The stock price is $50, and the risk-free rate of interest is 8 percent per annum with continuous compound
Company A & B have the same total assets, operating income (EBIT), tax rate, & business risk. Company A, however, has a much higher debt ratio than Company B.
Ridgefield Enterprises has total assets of 300 million dollar. The company currently has no debt in its capital structure. The company basic earning power is 15%. The company is contemplating a recapi
Determine the price would you pay in dollars to buy this Treasure bill?
Silver Company received proceeds of $94,250 on 10-year, eight percent bonds issued on January 1, 2007. The bonds had a face value of $100,000, pay interest semi-annually on June 30 and December 31, an
Brown Enterprises' bonds currently sell for $1,025. They have a nine year maturity, an annual coupon of $80, and a par value of 1,000 dollar. Calculate their current yield and yield to maturity.
If 10-year T-bonds have a yield of 5.2%, 10-year corporate bonds yield 7.5%, the maturity risk premium on all 10-year bonds is 1.1 percent, and corporate bonds have a 0.2% liquidity premium versus a z
A portfolio exists containing stocks A, B, and C held in proportions 50%, 30%, and 20 percent respectively. The expected returns on the three stocks are given by 10%, 15%, & 16 percent respectivel
At 8% compounded annually, how long will it take 750 dollar to double?
Over the past 75 years, we have observed that investments with the highest average annual returns also tend to have the highest standard deviations of their yearly returns.
Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par or $1,000) are priced at $850. Each debenture can be converted into 25 shares
When output is 50, fixed costs are $1,000 & variable costs are $2,000. Calculate the average total costs?