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In: Finance
Dixie Inc. is financing its new invention with issuance of 5 million shares of 10 years...
Dixie Inc. is financing its new invention with issuance of 5 million shares of 10 years 4% coupon bond with yield to maturity 6%, 10 million shares of preferred stock with dividend $3 and return of 10%, and 900 million shares of common equity at current price of $25 per share. If its common stock has beta 1.25 and long-term risk free rate is 2% and market total return is 8%. What is the Weighted Average Cost of Capital given its tax rate is 45%? Ignore flotation costs.
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jeff jeffy answered 2 years agoRelated Solutions
Myers Company Ltd. was formed 10 years ago by the issuance of 24,000 common shares to...
Myers Company Ltd. was formed 10 years ago by the issuance of
24,000 common shares to three shareholders. Four years later, the
company went public and issued an additional 30,000 common
shares.
The management of Myers is considering a takeover in which Myers
would purchase all of the assets and assume all of the liabilities
of Norris Inc. Two alternative proposals are being considered:
PROPOSAL 1
Myers would offer to pay $426,400 cash for the Norris net
assets. In addition,...
The corporate charter of Alpaca Co. authorized the issuance of 10 million, $1 par common shares....
The
corporate charter of Alpaca Co. authorized the issuance of 10
million, $1 par common shares. During 2020, its first year of
operations, Alpaca had the following transactions: January 1 sold 8
million shares at $15 per share June 3 retired 2 million shares at
$18 per share December 28 sold 2 million shares at $20 per share
What amount should Alpaca report as common stock, in its december
31 2020 balance sheet?
Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5% preferred...
Empire Today Inc. has 10 million shares of common stock
outstanding, 300,000 shares of 5% preferred stock outstanding, and
7 million of 6.7 percent semiannual bonds outstanding, par value
$1,000 each. The common stock currently sells for $85 per share and
has a beta of 1.15, the preferred stock currently sells for $103
per share, and the bonds have 20 years to maturity and sell for 93%
of par. The market risk premium is 11 percent, T-bills are yielding
2.14...
1) Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5%...
1) Empire Today Inc. has 10 million shares of common stock
outstanding, 300,000 shares of 5% preferred stock outstanding, and
7 million of 6.7 percent semiannual bonds outstanding, par value
$1,000 each. The common stock currently sells for $85 per share and
has a beta of 1.15, the preferred stock currently sells for $103
per share, and the bonds have 20 years to maturity and sell for 93%
of par. The market risk premium is 11 percent, T-bills are yielding...
Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5% preferred...
Empire Today Inc. has 10 million shares of common stock
outstanding, 300,000 shares of 5% preferred stock outstanding, and
7 million of 6.7 percent semiannual bonds outstanding, par value
$1,000 each. The common stock currently sells for $85 per share and
has a beta of 1.15, the preferred stock currently sells for $103
per share, and the bonds have 20 years to maturity and sell for 93%
of par. The market risk premium is 11 percent, T-bills are yielding
2.14...
Sabby Inc. issued a $1 million bond at 10% for 5 years to finance a project....
Sabby Inc. issued a
$1 million bond at 10% for 5 years to finance a project. The bonds
were issued on January 1, 2014. The bond pays interest annually on
January 1. The bonds are priced to yield 8%. The PV tables can be
used to calculate present values. The company used effective
interest method.
Required:
Calculate the proceeds (price) that Sabby would receive for the
bond on January I, 201•t.
Prepare a bond amortization schedule up to and including...
Sabby Inc. issued a $1 million bond at 10% for 5 years to finance a project....
Sabby Inc. issued a
$1 million bond at 10% for 5 years to finance a project. The bonds
were issued on January 1, 2014. The bond pays interest annually on
January 1. The bonds are priced to yield 8%. The PV tables can be
used to calculate present values. The company used effective
interest method.
Required:
Calculate the proceeds (price) that Sabby would receive for the
bond on January I, 201•t.
Prepare a bond amortization schedule up to and including...
Howett Pockett, Inc., plans to issue 10.1 million new shares of its stock. In discussions with...
Howett Pockett, Inc., plans to issue 10.1 million new shares of
its stock. In discussions with its investment bank, Howett Pocket
learns that the bankers recommend a net proceed of $34.00 per share
and they will charge an underwriter’s spread of 6.0 percent of the
gross proceeds. In addition, Howett Pockett must pay $3.5 million
in legal and other administrative expenses for the seasoned stock
offering.
Calculate the gross proceeds per share. (Round your
answer to 2 decimal places.)
Gross...
Teardrop Inc. wishes to expand its facilities. The company currently has 10 million shares outstanding and...
Teardrop Inc. wishes to expand its facilities.
The company currently has 10 million shares outstanding and no
debt.
The stock sells for $20 per share but the book value per share
is $47.
Net income for Teardrop is currently $2.7 million.
The new facility will cost $28 million and it will increase net
income by $340,000.
The par value of the stock is $1 per share.
Assume a constant price-earnings ratio.
Required:
1. a) Calculate the net book value per...
Cheer, Inc., wishes to expand its facilities. The company currently has 10 million shares outstanding and...
Cheer, Inc., wishes to expand its facilities. The company
currently has 10 million shares outstanding and no debt. The stock
sells for $40 per share, but the book value per share is $51. Net
income for Teardrop is currently $3.9 million. The new facility
will cost $45 million and will increase net income by $420,000. The
par value of the stock is $1 per share. Assume a constant
price-earnings ratio.
a-1.
Calculate the new book value per share. Assume the...
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