Get college assignment help at uniessay writers “How effective is Wal-Mart’s website in making it each to purchase goods? Elaborate on this. They are moving into service areas such as Hip to Site services: is this a good marketing tool
After-tax cost of debt Personal Finance Problem Bella Wans interested in buying a new motorcycle. She has decided to borrow the money to pay the $25,000 purchase price of the bike. She is in the 33% income tax bracket. She can either borrow the money at an interest rate of 5% from the motorcycle dealer, or she could take out a second mortgage on her home. That mortgage would come with an interest rate of 9%. Interest payments on the mortgage would be tax deductible for Bella, but interest payments on the loan from the motorcycle dealer could not be deducted on Bella’s federal tax return a. Calculate the after-tax cost of borrowing from the motorcycle dealership. b. Calculate the after-tax cost of borrowing through a second mortgage on Bella’s home. c. Which source of borrowing d. Should Bella consider any other factors when deciding which loan to take out? less costly for Bella? a. The after-tax cost of borrowing from the motorcycle dealership is%. (Round to the nearest whole percentage.)
Cost of common stock equity recently paid Ross Textiles wishes to measure its cost of common stock equity. The firm’s stock is currently selling for $56.03. The firm just dividend of $4.08. The firm has been increasing dividends regularly. Five years ago, the dividend was just $3.04. After underpricing and flotation costs, the firm expects to net $52.11 per share on a new issue. a. Determine average annual dividend growth rate over the past 5 years. Using that growth rate, what dividend would you expect the company to pay next year? b. Determine the net proceeds, N, that the firm will actually receive. c. Using the constant-growth valuation model, determine the required return on the company’s stock, rg, which should equal the cost of retained earnings, r d. Using the constant-growth valuation model, determine the cost of new common stock, r %. (Round to two decimal places.) a. The average annual dividend growth rate over the past 5 years is
in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has The cost of debt Gronseth Drywall Systems, Inc., informed the firm that different maturities willl carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each case, the bonds will have a $1,000 par value and flotation costs will be $40 per bond. The company is taxed at 23%. Use the approximation formula to calculate the after-tax cost of financing with the following alternative. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Premium or discount Coupon rate Time to maturity 14 years $160 5% 1%. (Round to two decimal places.) The after-tax cost of financing using the approximation formula is
Cost of preferred stock Taylor Systems has just issued preferred stock. The stock has a 11% annual dividend and a $120 par value and was sold at $127.20 per share. In addition, flotation costs of $9.60 per share were paid. Calculate the cost of the preferred stock. The cost of the preferred stock is%. (Round to two decimal places.)
Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 0.6. The risk-free rate is 5%, and the market return is 12% a. Determine the risk premium on Netflix common stock. b. Determine the required return that Netflix common stock should provide. c. Determine Netflix’s cost of common stock equity using the CAPM %. (Round to one decimal place) a. The risk premium on Netflix common stock is
The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table: WACC-Market value weights a. Calculate the firm’s weighted average cost of capital. b. Explain how the firm can use this cost in the investment decision-making process. . (Round to two decimal places.) a. The firm’s weighted average cost of capital, ra, using market value weights is Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost Long-term debt Preferred stock $950,000 6.5% $60,000 9.4% Common stock equity $600.000 14.2% Print Done Enter your answer in the answer box and then click Check Answer.
WACC-Book weights and market weights Webster Company has compiled the information shown in the following table: a. Calculate the weighted average cost of capital using book value weights. b. Calculate the weighted average cost of capital using market value weights. c. Compare the answers obtained in parts a and b. Explain the differences. %. (Round to two decimal places.) a. The firm’s weighted average cost of capital using book value weights is i Data Table (Click on the icon located on the top-right copy its contents into a spreadsheet.) corner of the data table below in order to Source of capital Long-term debt Book yalue Market value After-tax cost $4,000,000 40,000 1,060,000 $5,100,000 $4,160,000 62,000 4,070,000 $8,292,000 7% Preferred stock 11% Common stock equity 15% Totals Print Done Enter your answer in the answer box and then click Check Answer.
Weighted average cost of capital Personal Finance Problem John Dough has just been awarded his degree in business. He has three education loans outstanding. They all mature in 5 years and he can repay them without penalty any time before maturity. The amounts owed on each loan and the annual interest rate associated with each loan are given in the following table: John can also combine the total of his three debts (that is, $64,000) and create a consolidated loan from his bank. His bank will charge an annual interest rate of 4.2% for a period of 5 years. Should John do nothing (leave the three individual loans as is) or create a consolidated loan (the $64,000 question)? The weighted average annual interest rate on John’s current loan portfolio is%. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into spreadsheet.) Annual Loan Balance due interest rate 1 $20,000 5.7% 2 $10,000 $34,000 8.7% 4.7% Print Done Enter vour answer in ne answWer box ana nen ciCK Check Answer.
Bill Gates Co. has 1,000,000 euros as payables due in 30 days, and is certain that the euro will appreciate substantially over time. Assuming that the firm is correct, the ideal strategy is to: I purchase euro currency put options. purchase euro currency call options. purchase euros forward. remain unhedged (do nothing today). sell euros forward. Question 2 (2.5 points) Which of the following will increase the value (i.e. price or premium) of a call option? A decrease in volatility An increase in the exercise price An increase in time to expiration A decrease in the option’s intrinsic value.
Get college assignment help at uniessay writers It is generally least difficult to effectively hedge various types of: translation exposure and economic exposure transaction exposure. translation exposure. economic exposure. Question 8 (2.5 points) SuperHero Corporation will receive 200,000 Canadian dollars (C$) in 90 days from its export contracts. SuperHero plans to purchase options to hedge its receivable position. What type of option should SuperHero purchase? Either call option or put option. Put option Call option Both call option and put option
Microsoft purchased a call option on pounds for a premium of $.03 per pound with an exercise price of $1.34; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.33, Microsoft’s net profit per pound is (ignoring time value of money): -$0.03 -$0.02 $0.01 $0.02 None of these Question 10 (2.5 points) Which of the following statement about swaps is least accurate? In a plain vanilla interest rate swap, the notional principal is swapped. In a plain vanilla interest rate swap, fixed rates are traded for variable rates. The default problem li.e. default risk] is the most important limitation to the swap market.
Kushner Co. is a U.S.-based MNC with net cash inflows of euros and net cash inflows of Swiss francs. Buffett Co. is a U.S.-based MNC that has the same exposure as Kushner Co. in these currencies, except that its Swiss francs represent cash outflows. If these two currencies are highly negatively correlated in their movements against the dollar, which firm has a high exposure to exchange rate risk? The firms have about the same level of exposure. Buffett Co. Kushner Co. Neither firm has any exposure. Question 12 (2.5 points) Since the results of both a forward hedge and a money market hedge are known beforehand an MNC can implement the one that is more feasible True False Cannot tell; it depends on the future spot rate.
Calculate the monthly finance charge for the credit card transaction. Assume that it takes 10 days for a payment to be received and recorded, and that the month is 30 days long. (Round your cent.) $300 balance, 18 % , $50 payment (a) previous balance method $4.5 (b) adjusted balance method $3.75 (c) average daily balance method $7397 26 Need Help? Read It Talk to a Tutor Submit AnswerSave Progress Practice Another Version
Economic exposure can affect: Both MNCS and domestic firms. MNCS only. Only firms that engage in international business activities. Purely domestic firms only Question 16 (2.5 points) Chicago Co. and Dallas Co. both import materials from Germany for their production. Total import values of the two companies are very similar. Dallas then sells its end products to the US consumers. Chicago also sells its end product in the US markets. However, Chicago can also export its products to several European countries. Which company has larger transaction exposure? neither firm has any exposure. Dallas Co. the firms have about the same level of exposure. Chicago Co.
If Walmart desired to lock in the maximum it would have to pay for its net payables in pounds but wanted to be able to capitalize if the pounds depreciates substantially against the dollar by the time payment is to be made, the most appropriate hedge would be: selling euro call options. purchasing euro call options. a money market hedge. a forward purchase of euros. purchasing euro put options. Question 21 (2.5 points) A limitation of interest rate swaps is that there is a risk to each swap participant that the counter participant could default on his payments True False
Jeff Bezos Co. is a U.S. firm with annual export sales to Singapore of about S$800 million. Its main competitor is Elon Musk Co., also based in the United States, with a subsidiary in Singapore that generates about S$800 million in annual sales. Any earnings generated by the subsidiary firm is subject to a higher degree of translation exposure? are reinvested to support its operations. Based on the information provided, which the firms have about the same level of exposure. Jeff Bezos Co. neither firm has any exposure. Elon Musk Co. Question 23 (2.5 points) To hedge economic exposure, a company can: use forward hedge, money market hedge, or option hedge. use currency or plain vanilla swaps. restructure its operation. None of the above.
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Question 5 (30 marks) A firm that pays out 65% of its earnings of 20%. Its P/E ratio is 10 and its earnings per share is 108 cents. dividends has an accounting rate of return as What is the price per share? What is the dividend yield? If shares were bought, what would be the payback period? Assume the only return is the dividend What is the net book value perlshare of the asset investment of the company? If the risk-adjusted required rate of returm is 6%, what would be the NPV per share for buying shares? Would you buy shares using AROR or NPV? (ii) (iii) (iv) (v) (vi)
NM ROAUJO. Z6 msSIONS USed Find the monthly payment for the loan. (Round your answer to the nearest cent.) New-car financing of 3.3% on a 30-month $12,750 loan $1081.59 X Need Help? Talk to a Tutor Read It
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