Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 9, Problem 2Q
Summary Introduction
To discuss: The ways in which the WACC can be both average and marginal cost.
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The maturity value of an $35,000 non-interest-bearing, simple discount 4%, 120-day note is:
Carl Sonntag wanted to compare what proceeds he would receive with a simple interest note versus a simple discount note. Both had the same terms: $18,905 at 10% for 4 years. Use ordinary interest as needed.
Calculate the simple interest note proceeds.
Calculate the simple discount note proceeds.
What you're solving for
Solving for maturity value, discount period, bank discount, and proceeds of a note.
What's given in the problem
Face value:
$55300
Rate of interest:
10%
Length of note:
95
days
Date of note: August 23rd
Date note discounted: September 18th
Bank discount rate:9 percent
Chapter 9 Solutions
Financial Management: Theory & Practice
Ch. 9 - Define each of the following terms: a. Weighted...Ch. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - Distinguish between beta (i.e., market) risk,...Ch. 9 - Suppose a firm estimates its overall cost of...Ch. 9 - Calculate the after-tax cost of debt under each of...Ch. 9 - LL Incorporateds currently outstanding 11% coupon...Ch. 9 - Duggins Veterinary Supplies can issue perpetual...Ch. 9 - Prob. 4PCh. 9 - Summerdahl Resorts common stock is currently...
Ch. 9 - Booher Book Stores has a beta of 0.8. The yield on...Ch. 9 - Prob. 7PCh. 9 - David Ortiz Motors has a target capital structure...Ch. 9 - A companys 6% coupon rate, semiannual payment,...Ch. 9 - The earnings, dividends, and stock price of Shelby...Ch. 9 - Radon Homes’ current EPS is $6.50. It was $4.42 5...Ch. 9 - Spencer Supply’s stock is currently selling for...Ch. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - On January 1, the total market value of the...Ch. 9 - Suppose the Schoof Company has this book value...Ch. 9 - The following table gives the current balance...Ch. 9 - Start with the partial model in the file Ch09 P18...Ch. 9 - During the last few years, Jana Industries has...Ch. 9 - b. What is the market interest rate on Jana’s...Ch. 9 - Prob. 3MCCh. 9 - d. (1) What are the two primary ways companies...Ch. 9 - What is the estimated cost of equity using the...Ch. 9 - f. What is the cost of equity based on the...Ch. 9 - g. What is your final estimate for the cost of...Ch. 9 - h. Janas target capital structure is 30% long-term...Ch. 9 - i. Use Janas target weights to calculate the...Ch. 9 - Prob. 10MCCh. 9 - k. Should the company use its overall WACC as the...Ch. 9 - l. What procedures can be used to estimate the...Ch. 9 - m. Jana is interested in establishing a new...Ch. 9 - n. What are three types of project risk? How can...Ch. 9 - o. Explain in words why new common stock that is...Ch. 9 - p. What four common mistakes in estimating the...
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- Need the below table filled out for Short-term debt %, Long-term debt $,%, Common equity $,% and Total capital $,%. Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Notes payable 10,000,000 Fixed assets 70,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 11%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 6%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 12%, and this is the…arrow_forwardNed assistance with Q3 and Q4 below? Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby's common stock sells for $21 per share, its last dividend was $1.00, and the company will pay a dividend of $1.06 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. 11.06 % If the firm's beta is 1.3, the risk-free rate is 8%, and the expected return on the market is 11%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. 11.90% If the firm's bonds earn a return of 9%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. % On the basis of the results of parts a–c, what would be your estimate of Shelby's cost of equity?…arrow_forwardWhat monthly compounded interest rate would Second National Bank need to pay on savings deposits to provide an effective rate of 6.2%?arrow_forward
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