Project #4893 - Business Management

 

Problem Set for Module 7

 

 

 

Please work these problems and show step by step your work where necessary.

 

 

 

1.  Explain what is meant by the “pool of funds”.

 

 

 

2.  Define and then explain the differences between Initial Public Offerings (IPOs) and Seasoned Issues of Equity (SEOs).

 

 

 

3.  Use the following data to determine a company’s cost of capital:

 

 

 

Outstanding Bonds:    15 year life

 

                                    Coupon rate……6%

 

                                    Today’s Price….$1,019.00

 

 

 

Capital Structure:       30% debt and 70% equity

 

 

 

Company tax rate:      35%

 

 

 

Today’s stock price:   $50

 

 

 

Most recent dividend:$4.50

 

 

 

Earnings per share:     last year                      $12.50

 

                                    five years ago             $8.50  

 

 

 

            a.  Compute the cost of capital for the company.  Show all work.

 

 

 

b.  Now compute the cost of capital for when the company exhausts the “first level” of capital and compute the break point at which this occurs.  You may assume that flotation costs are 10% and that the company expects to have $100,000 of retained earnings. Show your work.

 

Subject Business
Due By (Pacific Time) 04/27/2013 09:00 pm
Report DMCA
TutorRating
pallavi

Chat Now!

out of 1971 reviews
More..
amosmm

Chat Now!

out of 766 reviews
More..
PhyzKyd

Chat Now!

out of 1164 reviews
More..
rajdeep77

Chat Now!

out of 721 reviews
More..
sctys

Chat Now!

out of 1600 reviews
More..
sharadgreen

Chat Now!

out of 770 reviews
More..
topnotcher

Chat Now!

out of 766 reviews
More..
XXXIAO

Chat Now!

out of 680 reviews
More..
All Rights Reserved. Copyright by AceMyHW.com - Copyright Policy