Problem 1: The MBI Company does not want to grow. The company's financial management believes it has no positive NPV projects. The company's operating financial characteristics are
Profit margin = 10%
Assets-sales ratio = 150%
Debt-equity ratio = 100%
Dividend-payout ratio = 50%
Calculate the sustainable growth rate for the MBI Company (this should be completed in Excel)
Problem 2: Define the three forms of market efficiency
Problem 3: What is preferred stock? Do you think it's more like debt or equity? Please provide one reason for your answer.
Problem 4-5: Following are the equity accounts for Kerch Manufacturing (this should be completed in Excel).
Common stock, $2 par $135,430
Capital surplus 203,145
Retained earnings 2,370,025
Total $2,708,600
a) How many shares are outstanding?
b) At what average price were the shares sold?
Problem 6-7. The eastern Spruce equity accounts for last year are as follows:
Common stock, $1 par (500 shares outstanding) _________
Capital surplus $50,000
Retained earnings 100,000
Total _________
Fill in the missing numbers (this should be completed in Excel).
Problem 8-10.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% per annum. Treasury bills that mature in one year yield 8% per annum, and the expected return on the market portfolio over the next year is 18%. The beta of Acetate's equity is 0.9. The firm pays no taxes (this should be completed in Excel)
a) What is Acetate's debt-equity ratio?
b) What is the firm's weighted average cost of capital?
c) What is the cost of capital for an otherwise identical all-equity firm?