Q: Bond 1 matures in two years and pays an annual coupon (at the end of the year) of 1%. The face value…
A: YTM With face value (FV), present value/ price (PV), period (n) and coupon payment (C), YTM is…
Q: 4. In a CDS the accrual payment is a payment made by CDS and occurs when the to CDS defaults a.…
A: CDS refers to the credit default swap. Under CDS buyer makes the series of agreed payment to the…
Q: An analyst is studying the movement of the stock Shrek. His research and came up with a different…
A: Probability of strong economy = 0.30 Probability of normal economy = 0.50 Probability of weak…
Q: The SWEET Corp. is considering the purchase of a new piece of equipment. The cost savings from the…
A: The IRR is the rate which equates the Present value of Cash Outflow to Present value of Cash Inflow.…
Q: Analyze the income statement of any company on an excel sheet using Graphs. Please share the…
A: Target Corporation is an American department store chain and it is eighth largest retailer in the…
Q: You need $30000 in cash to buy a car 15 years from today. You expect to earn 14 percent, compounded…
A: Future value is important to both investors and financial planners because it helps them to predict…
Q: The market value of Lays Corporation's equity is 50 million $ and the market value of its debt is 27…
A: Cost of equity = Risk free rate + (Market rate of return - risk free rate) * Beta Weight of equity…
Q: Investment required Present valae of cash infows NPV Usefl e of the project A $260,000 $505,900…
A: We know that profitability index can be calculated as follows = Present Value of Cash inflows /…
Q: the rest into stock B, with an expected return of 18.9%. What is the expected return of her…
A: Portfolio Expected Return: It is the expected return on the portfolio containing various…
Q: our department is choosing between two technology projects to launch in the upcoming quarter.…
A: Net present value is the difference between the present value of cash flow and initial investment of…
Q: Calculating missing cash flow On the timeline below, what is the missing cash flow at time 2? The…
A: Future Value: It is the worth of a resource at a particular date which measures nominal future sum…
Q: Larry wants to make a decision on a six- year amortized loan for him to buy a new car. The value of…
A: The maximum loan that Larry can pay in six years is the present value of monthly payment of $700 for…
Q: ective rate of interest on an investment is 5.52%, what is the nominal rate of interes nded monthly?
A: Solution:- Effective rate of interest means the net interest rate for the year after effect of all…
Q: Distinguish between the activities of retail and investment banks and discuss how this has an impact…
A: Retail banks and investment banks serve distinct clients and fulfill different responsibilities.…
Q: A & B D. Consider a port folio of E CRA) : 207. E CR): 30% 2. assets where nsky = 10% A,B :20% hnd…
A: Solution:- Minimum Variance Portfolio is that portfolio in which the weights of securities are such…
Q: What is the price of a U.S. Treasury bill with 36 days to maturity quoted at a discount yield of…
A: Treasury bills are referred to as short-term debt obligations which are backed up by the U.S.…
Q: up to $700 monthly in order to repay the loan. Determine if it is enough for him to agree on this…
A: Loan payment: These represent periodic payments made by the borrower to the lender for the purpose…
Q: Use the following information for the next three questions. Instrument Corp. has the following…
A: Available for sale security (Non-Trading Investment): It is a a debt or equity instrument which is…
Q: In identifying alternative courses of action, one should consider the following, except a. continue…
A: The answer is option (d) change the current situation. In identifying an alternative course of…
Q: Find the due date for 130 days note dated July 7,using Actual time
A: Note payable refers to those legal obligations of the company which will be paid on any specific…
Q: Part (a): It is said that the Indian who sold Manhattan for $33 was a sharp salesman. If he had put…
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: GenMath Corporation with a current market value of 40.92 declared a dividend of 6.72 per share for…
A: The dividend is the company's net profit for the period. Dividends are payments made to shareholders…
Q: The classified balance sheet for company reporte current assets o $1,688,830, tota abilities of…
A: Current ratio = Current assets/current liabilities
Q: A company will need $70,000 in 6 years for a new addition. To meet this goal, the company deposits…
A: Amount needed or accumulated amount (FV) = $70,000 Quarterly interest rate (r) = 0.0275 (i.e. 0.11 /…
Q: Choose the correct answer. 4. Financial goals are classified as to duration as follows, except a.…
A: Financial Industry Regulatory Authority (FINRA) defines the three types of duration for financial…
Q: a. Outline the three main forms of business organisation and critically discuss the benefits and…
A: Thanks for Questions “Since you have asked multiple question, we will solve the first question for…
Q: 13. A discounted loan of $3,000 at a simple discount rate of 6.5% is offered to Mr. Jones. If the…
A: A Simple Discount Loan refers to the type of loan where the interest is deducted at the time of…
Q: Mr. Dalisay applied for a bank loan with a principal of P150,000 to be paid after five years in…
A: Principal loan amount = P150,000 Loan period = 5 years Current market rate = 0.10 Principal will…
Q: Create a plan of investment on a bank and solve its interest with respect to the rate offered and…
A: Simple interest is computed on the loan's initial main amount, but compound interest is calculated…
Q: You are the financial manager of the firm LAB.inc which does research in the medical field, your…
A: Given, The yearly payments $100,000
Q: Suppose the spot exchange rate for the Hungarian Forint is HUF 209/USD. The infiation rate in the US…
A: The following information has been provided in the question: Spot exchange rate for Hungarian…
Q: Becky is a corporate account manager at a company that sells athletic equipment to other businesses.…
A: Bonus is the salary paid to an employee by the employer in addition to the basic salary. Bonuses…
Q: 1) Finance function is limited to supply of funds to the requirements of the organisation. True
A: 1)Financial management includes the Finance Function. The activity of controlling and planning…
Q: Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British…
A: An option is a financial derivative that gives the buyer the right to buy or sell the underlying…
Q: A 2-year zero-coupon bond with $100 principal is trading at $95.00. Price of a 2-year coupon bond…
A: In this given question we, need to calculate the spot rate for a Zero coupon bond and the spot rate…
Q: A homeowner just obtained a 30-year (360-month) mortgage for $120,000. The mortgage has a fixed…
A: Loan amount (P) = $120,000 Monthly interest rate (r) = 0.00666666666666667 (i.e. 0.08 / 12) Monthly…
Q: You bought a house with a 30-year mortgage with loan size $500,000 and interest rate 6%. Assuming…
A: First, we need to find out, yearly installment to be made. Solved using Financial Calculator PV =…
Q: True or False. 1. Personal financial activities may fall into spending, saving or sharing…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: What trust, privacy and ethical issues do businesses need to be concerned with when trading online?…
A: The main trust, privacy and ethical concerns of business while doing online trading are as follows:…
Q: a) Let's say you invest $10,000 into each account. What is the final amount after 10 years? b) How…
A: Future Value: It represents the future worth of the present amount and is estimated by compounding…
Q: d liabil
A: The entire direct obligation that company owners and associates undertake for all commercial…
Q: 4. In a CDS the accrual payment is a payment made by CDS to CDS and occurs when the defaults
A: In a CDS, the accrual payment is a payment made by a CDS buyer to a CDS seller and occurs when the…
Q: A middle-aged school teacher is dreaming about retirement. She believes she can comfortably leave…
A:
Q: protect consumers' financial information?
A: Financial information refers to data that can be measured in monetary terms and stored in the…
Q: What is the change in price the bond will experience in dollars?
A: Bond Price: It represents the current value of the bond and is estimated by discounting the coupon…
Q: Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British…
A: An option is a financial derivative that gives the buyer the right to buy or sell the underlying…
Q: Kiambu County Government has received equipment worth Kshs.461,520,000 from an American Company…
A: Foreign exchange risk It is the losses that a international monetary exchange might bring about…
Q: You bought a house with a 30-year mortgage with loan size $500,000 and interest rate 6%. Assuming…
A: First, we need to find out, yearly installment to be made. Solved using Financial Calculator PV =…
Q: In theory, only systematic risk matters for the required return of a stock. Why does non-systematic…
A: Systematic risk refers to those which impacts the whole market rather than on particular stock…
Q: Which of the below is true? Select one: Credit spreads tend to be lower in bull markets Credit…
A: From the given statements, we have to select the most correct statement. A bear market is a market…
ABC Co.’s target capital structure is 55% equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9%, and the company is subject to 30% income tax. The expected dividend next period is P5 and the current stock price is P45. What should be the firm’s growth rate in order to attain a weighted average cost of capital of 11.5%?
a. 2.68%
b. 3.44%
c. 4.64%
d. 6.75%
e. answer not given
Step by step
Solved in 2 steps with 2 images
- Parada, Inc. has a weighted average cost of capital of 11.5%. Its target capital structure is 55% equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9% and the company tax rate is 30%. If the expected dividend next period is P5 and the current stock price is P45, what is the company’s growth rate?Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $72 a share. The before-tax cost of debt is 6% and the tax rate is 34%. The target capital structure consists of 30% debt and 70% equity. What is the company's weighted average cost of capital?Please show the solution. Thank you. 1. Gateway Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9 percent, and the company’s tax rate is 30 percent. If the expected dividend next period is P5 and the current share price is P45, what is the company’s growth rate? 2. A company with cost of capital of 15% plans to finance an investment with debt that bears 10% interest. The rate it should use to discount the cash flows is?
- Sorenson Systems, Inc. is expected to pay a dividend of $3.30 at year end (D1), the dividend is expected to grow at a constant rate of 5.5% a year, and the common stock currently sells for $37.50 a share. The before-tax cost of debt is 7.5%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings?Your answer should be between 7.36 and 12.57, rounded to 2 decimal places, with no special characters.If the company's dividends growth rate is 2%, what would be the optimal capital structure for ABC Co.? ABC Co. has the following projected results for next year's operation depending on the chosen capital structure. Debt Dividends Cost of Ratio Per Share Equity 0% P5.50 11.5 % 25% 6.00 12.0 % 40% 6.50 13.0 % 50% 7.00 14.0 % 75% 7.50 15.0 % A. 0% debt; 100% equity B. 25% debt; 75% equity C. 40% debt; 60% equity D. 50% debt; 50% equity E. 75% debt; 25% equityA financial analyst wants to compute a company's weighted average cost of capital (WACC) using the dividend discount model. The company has a before-tax cost of new debt of 9%, tax rate of 37.5%, target debt-to-equity ratio of 0.76, current stock price of $74, estimated dividend growth rate of 7% and will pay a dividend of $3.2 next year. What is the company’s WACC A. 8 percent. B. 9 percent. C. 10 percent. D. 11 percent.
- A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 5% and the market risk premium (rM – rRF) is 6%. Currently the company’s cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm’s current leveraged beta using the CAPM 1.0 1.5 1.6 1.7Reingaart Systems is expected to pay a $4.2 dividend at year end (D1 = $4.2), the dividend is expected to grow at a constant rate of 4.1% a year, and the common stock currently sells for $62 a share. The before-tax cost of debt is 8.4%, and the tax rate is 24%. The target capital structure consists of 75% debt and 25% common equity. What is the company's WACC if all equity is from retained earnings? 8.41% O 7.51% 8.11% O 7.81% O 8.71%Sorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is expected to grow at a constant rate of 5.0% a year, and the common stock currently sells for $50.00 a share. The before-tax cost of debt is 6%, and the tax rate is 41%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC if all the equity used is from retained earnings?
- A company’s capital structure consists solely of debt and common equity. It can issue debt at 15% interest rate, and its common stock is expected to pay a $5 dividend per share next year. The stock’s price is currently $40; its dividend is expected to grow at a constant rate of 3 percent per year; its tax rate is 30 percent and its WACC is 14 percent. Calculate the after-tax cost of debt and the cost of common equity. What percentage of the company’s capital structure consists of common equity?Sarensen Systems Inc. is expected to pay a dividend of $2.50 at year end (D), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $ 37.50 a share. The before -tax cost of debt is 7.50 %, and the tax rate is 40% . The target capital structure consists of 45% debt and 55% common equity.What is the company's WACC if all the equity used is from retained earnings?Honda Inc. (HI) has the following capital structure, which it considers to be optimal: debt = 25%, preferred stock = 15%, and common stock = 60%. Honda Inc.’s tax rate is 40%, and investors expect earnings and dividends to grow at a constant rate of 6% in the future. Honda Inc. paid a dividend of $3.70 per share last year (D0), and its stock currently sells at a price of $60 per share. Ten-year Treasury bonds yield 6%, the market risk premium is 5%, and Honda Inc.’s beta is 1.3. The following terms would apply to new security offerings. Preferred: New preferred could be sold to the public at a price of $100 per share, with a dividend of $9. Flotation costs of $5 per share would be incurred. Debt: Debt could be sold at an interest rate of 9%. Common: New common equity will be raised only by retaining earnings a. Find the component costs of debt, preferred stock, and common stock. b. What is the WACC?