Q: Hartford Mining has 50 million shares that are currently trading for $
Hartford Mining has 50 million shares that are currently trading for $4 per share and $200 million worth of debt. The debt is risk free and has an interest rate of 5%, and the expected return of Hartf...
See AnswerQ: Mercer Corp. has 10 million shares outstanding and $100 million
Mercer Corp. has 10 million shares outstanding and $100 million worth of debt outstanding. Its current share price is $75. Mercer’s equity cost of capital is 8.5%. Mercer has just announced that it wi...
See AnswerQ: In mid-2015 Qualcomm Inc. had $11 billion in
In mid-2015 Qualcomm Inc. had $11 billion in debt, total equity capitalization of $89 billion, and an equity beta of 1.43 (as reported on Yahoo! Finance). Included in Qualcomm’s assets was $21 billion...
See AnswerQ: Indell stock has a current market value of $120 million and
Indell stock has a current market value of $120 million and a beta of 1.50. Indell currently has risk-free debt as well. The firm decides to change its capital structure by issuing $30 million in addi...
See AnswerQ: Jim Campbell is founder and CEO of Open Start, an innovative
Jim Campbell is founder and CEO of Open Start, an innovative software company. The company is all equity financed, with 100 million shares outstanding. The shares are trading at a price of $1. Campbel...
See AnswerQ: Yerba Industries is an all-equity firm whose stock has a
Yerba Industries is an all-equity firm whose stock has a beta of 1.2 and an expected return of 12.5%. Suppose it issues new risk-free debt with a 5% yield and repurchases 40% of its stock. Assume perf...
See AnswerQ: You are CEO of a high-growth technology firm. You
You are CEO of a high-growth technology firm. You plan to raise $180 million to fund an expansion by issuing either new shares or new debt. With the expansion, you expect earnings next year of $24 mil...
See AnswerQ: Zelnor, Inc., is an all-equity firm with 100
Zelnor, Inc., is an all-equity firm with 100 million shares outstanding currently trading for $8.50 per share. Suppose Zelnor decides to grant a total of 10 million new shares to employees as part of...
See AnswerQ: Suppose Levered Bank is funded with 2% equity and 98%
Suppose Levered Bank is funded with 2% equity and 98% debt. Its current market capitalization is $10 billion, and its market to book ratio is 1. Levered Bank earns a 4.22% expected return on its asset...
See AnswerQ: Wolfrum Technology (WT) has no debt. Its assets will
Wolfrum Technology (WT) has no debt. Its assets will be worth $450 million in one year if the economy is strong, but only $200 million in one year if the economy is weak. Both events are equally likel...
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