Questions from Financial Management

Q: LL Incorporated’s currently outstanding 11% coupon bonds have a yield to

LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax...

Q: Duggins Veterinary Supplies can issue perpetual preferred stock at a price of

Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the company’s cost of preferred st...

Q: After discovering a new gold vein in the Colorado mountains, CTC

After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric a...

Q: Messman Manufacturing will issue common stock to the public for $30

Messman Manufacturing will issue common stock to the public for $30. The expected dividend and the growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 10% of the iss...

Q: Suppose a company will issue new 20-year debt with a

Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 2% of the issue proceeds, then what is th...

Q: A project has an initial cost of $40,000,

A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project’s NPV? (Hint: Begin by constructing a time line.)...

Q: Refer to Problem 12-1. What is the project’s IRR

Refer to Problem 12-1. What is the project’s IRR? Data from Problem 12-1: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of...

Q: Refer to Problem 9-1. What would be the additional

Refer to Problem 9-1. What would be the additional funds needed if the company’s year-end 2015 assets had been $7 million? Assume that all other numbers, including sales, are the same as in Problem 9-...

Q: Refer to Problem 9-1. Return to the assumption that

Refer to Problem 9-1. Return to the assumption that the company had $5 million in assets at the end of 2015, but now assume that the company pays no dividends. Under these assumptions, what would be t...

Q: Burnwood Tech plans to issue some $60 par preferred stock with

Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70. Burnwood must pay flotation costs of 5% of the issue price. What is the...