|Due By (Pacific Time)||01/05/2017 12:00 am|
#1)Pioneer's prreferred stock is selling for $29 in the market and pays a #3.80 annual dividend. a) If the market's required yield is 14%, What is the value of the stock for that investor? (round to the nearest cent) b.)Should the investor acquire the stock? The investor should not or should acqiure the stock because it is currently over priced or under price in the market.
#2) Your firm is planning to issue preferred stock. The stock is expected to sell for $97.43 a share and will have a $100 par value on which the firm will pay a 14.8% dividend. What is the cost of capital to the firm for the preferred stock?(round to two decimal places).
#3)Belton Distribution Company is issuing a $1,000 par value bond that pays 7.0% annual interest and matures in 15 yrs. that is paid semiannually. Investors are willing to pay $958 for the bond. The company is in the 18% marginal tax bracket. What is the firm's after tax cost of debt on the bond?(round to two decimal places).
#4)In August of 2009 the capital structure of the Emerson Electrice Corportion (EMR) (measured in book and market values) appeared as follows:
(thousands of dollars) Book values Market values short term debt $1,130,000 $1,130,000
long term debt 11,848,000 11,848,000 common equity 9,037,000 26,257,000
total capital $22,015,000 $39,235,000
What weights should Emerson use when computing the firm's weighted average cost of capital? The appropriate weight of debt is --------------% (round to one decimal place). The appropriate weight of common equity is---------% (round to one decimal place)
#5) Dharma Supply has earnings before interest and taxes(EBIT) of $598,000 interest expenses of $259,000, and faces a corporate tax rate of 35%.a) What is Dharma Supply's net income? (round to the nearest dollar). b) What would Dharma's net income be if it didn't have any debt (and consequently no interest expense)(round to the nearest dollar) c) What are athe firm's interest tax savings? (round to nearest dollar.
#6) In the spring of 2013 the Caswell Publishing company established a custom publishing business for it's business clients. These clients consisted principally ofsmall to medium size companies inRound Rock, Texas. However, the company's plans were disrupted when they landed a large priting contract from Dell Computers Corp. (Dell) that theyexpected would run for several years. Specifically, the new contract would increase firm revenues by100%. Consequently, Caswell's management knew they would need to make some signicant changesin firm capacity, and quickly. The following balance sheet for 2013 and proforma balance sheet for 2014 reflect the firm's estimates of the financial impact of the 100% revenue growth:
Caswell Publishing Co. Proformma Balance
Sheet 2014 100%
Balance Sheet for 2013
current assets $12,010,000 $24,020,000
net fixed assets 17,970,000 35,940,000
Total 29,980,000 59,960,000
acc.payable 2,000,000 4,000,000
accrued expenses 1,910,000 3,820,000
notes payable 1,520,000 1,520,000
current liabilities $5,430,000 $ 9,340,000
long term debt 6,520,000 6,520.000
total liabilities $11,950,000 $15,860,000 common stock (par) 1,010,000 1,010,000
paid in capital 2,1000,000 2,100,000 retained earnings 14,920,000 14,900,000 common equity $18,030,000 $18,030,000 total $29,980,000 $33,890,000 projected sources of financing discretionary financing needs total financing needs= total assets
a) How much new discretionary financing will Caswell require based on the above estimates?(round to nearest dollar.)
b)Given the nature of the new contract and the specific needs for financing that the firm expects, what recommendations might you offer to the firm's CFO as to specific sources of financing the firm should seek to full fill its DFN?
a) retained earnings
b) common stock
c) Sales of fixed assets
d) notes payable
e) long term debt
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