Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) ABC Manufacturing is major producer of farm equipment. Presently, firm has two divisions: machinery division and farm implement division – each have various degrees of risk. You have got the following partial information for ABC Manufacturing:

Debt

Bond A 10 year bond 9% paid semi-annually issued 2008 $1,000,000
Bond B 15 year bond 6% paid semi-annually issued 2010 $4,000,000
Bond C 3 year bond 5% paid semi-annually issued 2012 $1,000,000
Total bonds issued and outstanding $6,000,000
Common Equity
Common Shares $200,000
Contributed Surplus $1,800,000
Retained Earnings $2,000,000
Total Equity $4,000,000

You observe that thirty day Government T-bills are selling to yield 0.2432445% or 3% per year and market risk premium for firm is= 10%. Average beta for firm is 1.4. Firm has marginal tax rate of= 40%. Company shares are presently selling in market for= $56.55 and firm just paid its most current dividend of= $8.00. Management expects to be able to maintain a growth rate of 2.5% forever.

a) Based on information given above, compute the cost of borrowing by using debt for present company.

Requirements
Min Pages: 1

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915171

Have any Question? 


Related Questions in Basic Finance

1 a researcher would like to compare two therapy techniques

1. A researcher would like to compare two therapy techniques for treating depression in both adolescents and adults. Identify which factor is experimental and which is quasi-experimental. 2. Suppose a researcher has demo ...

1 how would you define or describe the concept of culture2

1. How would you define or describe the concept of culture? 2. How is the research of Trompenaars similar to or different from that of Hofstede? 3. What do you consider to be the most important factors of culture in term ...

Diamond inc recently paid a 110 dividend future dividends

Diamond, Inc recently paid a $1.10 dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25over the next four years, respectively. Beginning five years from now, the dividend is expected to increase by ...

Sandoval enterprises has gathered the projected cash flows

Sandoval Enterprises has gathered the projected cash flows for two projects. At what interest rate would the firm be indifferent between the two projects? Which project is better if the WACC is above the interest rate? W ...

Explain whether you agree with the following statement the

Explain whether you agree with the following statement: The Federal Reserve believes that two-thirds of the currency included in M1 is actually outside the United States. If this is correct, then M1 should be redefined t ...

1 what is the required rate of return on a common stock

1. What is the required rate of return on a common stock that is expected to pay a $0.75 annual dividend next year if dividends are expected to grow at 2% annually and the current stock price is $8.59? 2. Inc. paid $.130 ...

Suppose your firm had issued a 12 percent annual coupon

Suppose your firm had issued a 12 percent annual coupon, 15-year bond, callable at par at the 8th year. It is now two years later, so the bonds are not callable for another 6 years. At this time, new bonds could be issue ...

Research a potential employerassume that your favorite

Research a potential employer. Assume that your favorite company has invited you to interview. To prepare for the interview, research the company by reviewing its website, reading news stories, and exploring websites suc ...

1 distinguish between theory model and hypothesis2 describe

1. Distinguish between theory, model, and hypothesis. 2. Describe how researchers use induction versus deduction to generate research hypotheses. 3. Describe the process by which hypotheses are developed and tested.

Household budgetshould be in apa writing style1 create a

Household Budget Should be in APA writing style. 1. Create a simple household budget, including all income and expenses. There are various templates available online to help you do this. Find one that you feel comfortabl ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen