As the Vice President of a Finance company with the following available data: Total assets $ 10,000,000.00 Debt $ 2,500,000.00 common equity $ 7,500,000.00 before tax cost of debt 12.00% risk-free rate
Two current problems are attached. Problem 16-6 and an attached file called "cyberproblem". In order to work the problems, I have also attached a current lecture and PPT presentation for a total of 4 attachments. Please use Yahoo Finance or Moneycentral.com if you can't obtain the necessary information from Quicken.com.
Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum. Treasury bills that mature in one year yield 8 percent per annum, and the expected return on the market portfolio over the next year is 18 percent. The beta of Acetate's equity i
Northern Conglomerate has two divisions, Division A and Division B. Northern looks at competing pure-play firms to estimate the betas of each of the two divisions. After this analysis, Northern concludes that Division A has a beta of 0.8 and Division B has a beta of 1.5. The two divisions are the same size. The risk-free rate is
Should your division be using moving average, weighted average, or exponential smoothing in forecasting calculations? What are the advantages of moving average? What are the advantages of exponential smoothing? You are the Operations Manager for a $50,000,000 (sales) subsidiary of a $750,000,000 corporation. You report t
Given the following data, compute the WACC Cost (after tax) Weights Weighted Cost Debt (Kd) 7.70% 30% Preferred stock (Kp) 10.81 15 Common equity (Ke)(retained earnings) 13.00 55 Weighted average cost of capital
1. What is the expected YTM on a bond that pays a $15 coupon annually, has a $1,000 par value, and matures in six years if the current price of the bond is $978? 2. A project costs $14.7 million is expected to produce cash flows of $4 million a year for 15 years. The opportunity cost of capital is 20%. If the firm has to iss
Given the following data, compute the WACC Cost (after tax) Weights Weighted Cost Debt (Kd) 7.70% 30% Preferred stock (Kp) 10.81 15 Common equity (Ke) 13.00 55 (retained earnings) Weighted average cost of capital (Ka)?
A.-The maximum loss is limited to the strike price of the underlying asset less the premium. b.-The gain or loss is equal to but of the opposite sign of the buyer of a put option. c.-The maximum gain is the amount of the premium. (correct) d.-All of the above are true. A call option on euros is written with a strike pr
Use the Corporate Value model and the following data to calculate a firm's total intrinsic (current) value and intrinsic value per share: 1st yr: PBT = $1 million; Net capital investment = $200,000 2nd yr: PBT = $1.2 million; Net capital investment = $250,000 3rd yr: PBT = $1.3 million; Net capital investment - $125,000
If a firm's capital structure is 40% debt, 10% preferred stock, and 50% common stock, their tax rate is 40%, and this Kd = 9%, Kp = 5%, and Ks = 12%, what is the firm's WACC? Also, show the formula and entries on a financial calculator.
See attached file for full problem description Problem 6-3 Preferred Stock. Preferred Products has issued preferred stock with an $8 annual dividend that will be paid in perpetuity. a. If the discount rate is 12 percent, at what price should the preferred sell? b. At what price should the s
1) Even though preferred stock is generally more risky to investors, the before-tax yield on preferred stock is sometimes less than the before-tax yield on the same company's bonds. Why? 2) A company has a capital structure that consists of 50 percent debt and 50 percent equity. Which of the following statements is most corre
1. A firm controls the amount of financial risk through the level of debt in the firm? True or False 2. The level of fixed costs would directly impact the amount of business risk for a firm? True or False 3. The amount of debt on the firm's balance sheet does not affect its capital budgeting decisions? True or False
A company has 2,000,000 share of outstanding common stock with a market price of $2.00 per share. The company has 2,000 outstanding bonds that are selling for $1,200. The bonds mature in 15 years, have a coupon rate of 10%, and pay coupons annually. The company's beta is 1.2, the risk free rate is 5%, and the market premium i
Capital structure is :common stock =60%,Debt=25%, Preferred Stock =15%. Tax rate 40% dividends will grow at 6%. Company paid a dividend of $3.50 last year and its stock sells for $50. Tbonds yield 6%, the market risk premium is 5%, and Company A's beta is 1.3. New preferred stock could be sold for $100 a share with a dividen
A company's balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show that that the company has 10 million shares of stock; the total of common stock and
You are employed by CGT, a Fortune 500 firm that is a major producer of chemicals and plastic goods: plastic grocery bags, styrofoam cups, and fertilizers. You are on the corporate staff as an assistant to the Vice-President of Finance. This is a position with high visibility and the opportunity for rapid advancement, providing
Please see ** ATTACHED ** file(s) for complete details!! ------------ 1. Read the attached Economist magazine article on real estate prices and answer the following two questions: · Discuss at least one factor that has an influence on housing demand that was not given much weight in the article. · Discuss at least
True/False: If the shape of the curve depicting a firms's WACC versus its debt-to-assets ratio is more like a sharp "V", as opposed to a shallow "U", it will be easier for the firm to maintain a steady dividend in the face of varying investment opportunities from year to year.
Please see the two attached documents where complete problem is given. Your Director of Supply Chain needs help in developing forecasts. Choose one of the following three options. - Must show work..... Develop forecasts for periods 6 through 24 using MA with 3 periods, 4 periods, and 5 periods, or... Dev
Which of the following statements is correct? Because we often need to make comparisons among firms that are in different income tax brackets, it is bes to calculate the WACC on a before-tax basis If a firm has been suffering accounting losses and is expected to continue suffering such losses (and therefore its tax rate is
Acetate Inc. has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum. Treasury bills that mature in one year yield 8 percent per annum, and the expected return on the market portfolio over the next year is 18 percent. The beta of Acetate's equity
WACC Problem - Copernicus Inc. has determined that its target capital structure will be 605 debt, 105 preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the company's before tax cost of debt is 10%, preferred stock is 14% and the common stock is 16%. In addition, the company's margina
When performing merger valuation: if Company A has 1 million shares outstanding worth $10 per share, and a capital structure that consists of 30% debt at a 9% interest rate. Company A is considering buying company B, which has 500,000 shares outstanding worth $5 each & no debt. Company B's cost of equity is 12% & Company A
The attached table is needed in this problem.... Carr Auto Parts is trying to calculate it's cost of capital for use in a capital budgeting decision.Mr.Horn, the vice president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has ou
These 2 questions need the attached Table 11-1. Global Technology's capital structure is as follows : _______________________ Debt------------------------35% Preffered stock------------15 Common Equity-----------50 _______________________ The aftertax cost of debt is 6.5%; the cost of preferred stock is 10%; and the c
ONE Calculate the weighted average cost of capital for the Luxury Porcelain Company. The book value of Luxury's outstanding debt is $60 million. Currently, the debt is trading at 120 percent of book value and is priced to yield 12 percent. The 5 million outstanding shares of Luxury stock are trading at $20 per share. The re
Kepler, Inc. has determined that its target capital structure will be 30% debt, 15% preferred stock, and 55% common stock. Also, the company's provides the following information: Bond coupon rate 13% Bond yield to maturity 11% Dividend, expected common $3.00 Dividend, preferred $10.00 Price, common $50.00 Price, pref
A firm is opening a new factory, initial investment required would be £5m, the firms current share capital is of 10 million ordinary shares of 10p each. the market price of the shares is 198p ex div (year 2005 = 7.35 dividend per share), the company has declared a single dividend each year, payable on 30 June. the firm has 1 m