The Pharoah Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,418.61 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $18 per share. The preferred shares pay an annual dividend of $1.20. Pharoah also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Pharoah is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital?

Calculate the weights for debt, common equity, and preferred equity.

Calculate the cost of debt.

Calculate the cost of preferred equity.

Calculate the cost of common equity.

What is the firm’s weighted average cost of capital

2. Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company’s pension fund management division, with Campbell having responsibility for fixed income securities (primarily bonds) and Morris being responsible for equity investments. A major new client, the California League of Cities, has requested that Mutual of Chicago present an investment seminar to the mayors of the represented cities. Campbell and Morris, who will make the actual presentation, have asked you to help them by answering the following questions. a. What is the value of a 1-year, $1,000 par value bond with a 8% annual coupon if its required rate of return is 12%? What is the value of a similar 10-year bond? b. What would be the value of the bond described in part (a) if, just after it had been issued, the expected inflation rate rose by three percentage points, causing investors to require a 15% return? Is the security now a discount bond or a premium bond? c. What would happen to the bond’s value if inflation fell, and rd declined to 8%? Would it now be a premium bond or a discount bond? d. What is the yield to maturity on a 10-year, 8% annual coupon, $1,000 par value bond that sells for $880.00? That sells for $1,130.50? What does the fact that a bond sells at a discount or at a premium tell you about the relation¬ship between rd and the bond’s coupon rate?What would happen to the value of the 10-year bond over time if the required rate of return remained at (i) 12% or (ii) remained at 8%?

Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.18 million and create incremental cash flows of $820,227.00 each year for the next five years. The cost of capital is 11.69%. What is the net present value of the J-Mix 2000?

Answer format: Currency: Round to: 2 decimal places.

Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.96 million and create incremental cash flows of $500,207.00 each year for the next five years. The cost of capital is 9.34%. What is the internal rate of return for the J-Mix 2000?

Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))

Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.98 million and create incremental cash flows of $640,301.00 each year for the next five years. The cost of capital is 9.10%. What is the profitability index for the J-Mix 2000?

Answer format: Number: Round to: 3 decimal places.

I would really appreciate the Help!! :) would be great if you could show the steps (not on excel) for better understanding! Thank You~

Ten Pins Manufacturing has 9.2 million shares of common stock outstanding. The current share price is $62, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $71.8 million and a coupon rate of 7.9 percent and sells for 107.4 percent of par. The second issue has a face value of $61.8 million and a coupon rate of 8.4 percent and sells for 110.7 percent of par. The first issue matures in 8 years, the second in 27 years.
The company’s stock has a beta of 1.2. The risk-free rate is 4 percent, and the market risk premium is 7.9 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is WACC?

Problem 16-25 MM with Taxes Dickson, Inc., has a debt-equity ratio of 2.65. The firm’s weighted average cost of capital is 10 percent and its pretax cost of debt is 7 percent. The tax rate is 25 percent.

a. What is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c. What would the company’s weighted average cost of capital be if the company's debt-equity ratio were .45 and 1.65? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Suppose the inflation rate is expected to be 6.3% next year, 4.15% the following year, and 3.65% thereafter. Assume that the real risk-free rate, r*, will remain at 2.3% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds.

a.

Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.

Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $910,000, and it would cost another $25,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $650,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $16,000. The sprayer would not change revenues, but it is expected to save the firm $357,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%.

(Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.

1. What is the Year-0 net cash flow?
2. What are the net operating cash flows in Years 1, 2, and 3?

3. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)
4. If the project's cost of capital is 14%, what is the NPV of the project?

Should the machine be purchased?

Individual or component costs of capital) Compute the cost of capital for the firm for the following:

• A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.8%. Interest payments are $54.00 and are paid semiannually. The bonds have a current market value of $1,130 and will mature in 15 years. The firm's marginal tax rate is 34%.
• A new common stock issue that paid a $1.77 dividend last year. The firm's dividends are expected to continue to grow at 8.4% per year, forever. The price of the firm's common stock is now $27.61.
• A preferred stock that sells for $141, pays a dividend of 8.5%, and has a $100 par value.
• A bond selling to yield 10.4% where the firm's tax rate is 34%

You are considering making a movie. The movie is expected to cost $ 10.7 million up front and take a year to produce. After​ that, it is expected to make $ 4.8 million in the year it is released and $ 2.2 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.6 %​?

Assume a corporation has just paid a dividend of $ 3.52 per share. The dividend is expected to grow at a rate of 3.8% per year forever, and the discount rate is 6.9%. What is the Capital Gains yield of this stock? Enter your answer as a percentage, rounded to 1 decimal, and without the percentage sign. So, if your answer is 0.05678, just enter 5.7.

CASH CONVERSION CYCLE - HELLO, THIS IS ALL ONE QUESTION, THANK YOU SO MUCH IN ADVANCE!

Parramore Corp has $20 million of sales, $3 million of inventories, $4 million of receivables, and $2 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 6% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.

1. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places.
     days
2. If Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places.
     days
3. How much cash would be freed up, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $
4. By how much would pretax profits change, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $

CURRENT ASSETS INVESTMENT POLICY - HELLO, THIS IS ALL ONE QUESTION, THANK YOU VERY MUCH IN ADVANCE FOR ANY HELP YOU CAN GIVE!

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 50% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 13% of total sales, and the federal-plus-state tax rate is 40%.

1. What is the expected return on equity under each current assets level? Round your answers to two decimal places.

   Restricted policy		%
   Moderate policy		%
   Relaxed policy		%

2. In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?
   1. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.
   2. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.
   3. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.
   4. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.
   5. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.

On Monday morning you sell one June T-bond futures contract at $98,622.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions.

The balance in your margin account after Wednesday will be $ _______.

Multiple Choice

• 1,322.75

• 1,768.45

• 383.86

• 543.75

On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions.

At the close of day on Tuesday your cumulative rate of return on your investment is _____.

Multiple Choice

• −0.16%

• −5.8%

• −2.2%

• 16.2%

The initial margin requirement of an interest rate futures contract is 11% with a price of $128,547. The futures is worth $100,000 per contract. The percentage profit/loss of the investor with a short position of this futures will be _________ if the futures price becomes $126,000.

Multiple Choice

• 29.01% loss

• 18.01% loss

• 29.01% profit

• 18.01% profit

You shorted two S&P 500 index futures contracts at 1,558 two weeks ago. Your profit/loss will be $ _____________ if currently the S&P 500 futures price is at 1,562, assuming each S&P 500 index futures contract is worth $1,000? (Put a negative sign "-" in front of the number if it is a loss.)