Question If you own a zero coupon bond that is that will pay $100,000 in 5 years and market interest rates for similar bonds fall from 8% to 6%, what happens to the value of your bond? The value will increase by $13,110.25 The value will decrease by $13,110.25 The value will not change The […]
Question Fletcher Corporation is debating whether to convert its all-equity capital structure to one that is 40% debt. Currently, there are 1967 shares outstanding selling at $72 per share. EBIT is expected to remain at $14195 per year forever. The interest rate on new debt is 6%, and there are no taxes. You currently hold […]
Question Question Zorin Industries has a debt-equity ratio of 1.6. Its WACC is 13%, and its cost of debt is 8%. The corporate tax rate is 35% What is Zorin’s unlevered cost of equity capital? ANSWER IS 16.27 Please show all work so I can figure out where I went wrong Zorin Industries has a […]
Question Cede & Co. expects its EBIT to be $72938 every year forever. The firm can borrow at 10%. Cede currently has no debt, and its cost of equity is 24%. The tax rate is 31%. What is the firm’s cost of equity capital after borrowing $45,000 and using the proceeds to repurchase shares (i.e., […]
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