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You want to borrow $45,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $950, but no more. Assuming monthly compounding, what is the highest APR you can aff
Southern California Publishing Company is trying to decide whether to revise its popular textbook, Financial Psychoanalysis Made Simple.
What is the value of today of a 15-year annuity that pays $500 a year? The annuity's first payment occurs at the end of year 6. The annual interest rate is 12 percent for years 1 through 5, and 15 p
Maynard, Inc., has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal.
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $600,000 in stock. XYZ uses both stock and perpetual debt; its stock is wo
Seether, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 35 percent debt. Currently, there are 8,000 shares outstanding,
Pettigout's Seafood Supplies is contemplating using its boat for additional duties. If it does so, then the boat will have to be replaced three years earlier than without the additional duties.
Calculate the price of a stock with a three-year horizon, when the stock is expected to pay $2.50 per share in dividends each year, and has an expected value of $100 at the end of the third year. Th
Chris's Fulltime Frenzy issues only common stock and coupon bonds. CFF has a debt-equity ratio of .60. The cost of equity is 13.7 percent and the pre-tax cost of debt is 9.4 percent. The tax rate is
What financial information does the current ratio measure? How does the current ratio relate to the other liquidity ratios? Which financial ratios would you use - and how - to determine whether a co
Management has told the manager of division A that projects in his division will be assigned a discount rate that equals 80% of the firms weighted average cost of capital. What is the WACC for ABC &
Define the term "incremental cash flow." Since the project will be financed in part by debt, should the cash flow statement include interest expenses? Explain.
Rodriguez Roofing's stock has a beta of 1.23, its required return is 11.25%, and the risk-free rate is 4.30%. What is the required rate of return on the stock market?
KKM has a cost of equity of 14.5%. The market risk premium is 8.4 percent and the T-Bill rate is 3.5%. KKM is acquiring a competitor, which will increase the company's beta to 1.4. What will KKM's c
Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt ratio of 55%. The size of the firm does not change. How much debt must the
Reddick Enterprises' stock currently sells for $40.50 per share. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, r, is 9.00%. W
The bonds are currently quoted at 96 and pay interest semiannually. What is the capital structure weight of the firm's debt if the tax rate is 34 percent?
Erine's Smooth Stories has a current yield of 9.20% on their bonds that are selling for $1060.00 each. These bonds mature in 19 years. The bond pays interest semiannually and have a face value of 1,
Stembridge Company is setting up to manufacture a new line of products. The cost of the manufacturing equipment is $750,000. Expected cash flows over the next four years are $125,000, $250,000, $400
The cost of the project will be $23 million, and the project is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital i
CCC Corp. has beta 1.5 and is currently in equilibrium. Required rate of return on stock is 12% versus required return on average stock which is 10%. Now the required return on average stock increas
What is the yield to maturity of a bond that pays an 11% coupon rate with annual coupon payments, has a par value of $1,000, matures in 9 years, and is currently selling for $897?
First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 16% APR compounded daily. The EAR for First Choice and National Emerald Bank are:
Lydia wishes to invest $3000 in company A and $7000 in company B. She currently only has 5000 and will borrow the remaining amt to form her 2 asset portfolio. If company A has beta of 1.21 and compa
One drawback of switching from a partnership to the corporate form of organization is the following: