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Finance 5000

In: Business and Management

Submitted By kylil1019
Words 2880
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1
FINAL EXAM
FINC 5000
Instructions:
1. Please write your name on your answer sheet. Show your detail works
2. The exam is individual work. It is to be your work and your work alone, with no assistance from classmates, family, friends or others.
3. Your completed exam is due on or before 10/09/12 (11:59 P.M).
4. By proceeding with the exam you are agreeing not to share the exam content or your answers with anyone, including students who may take FINC 5000 in the future
GOOD LUCK
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
1. To help finance a major expansion, Bull Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 10% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?

2. Assume that Kelly Inc. hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: D0 = $0.80; P0 = $27.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of common from retained earnings?

3. You were recently hired by TOM TOM Inc. to estimate its cost of common equity. You obtained the following data: D1 = $1.75; P0 = $42.50; g = 8.00% (constant); and F = 5.00%. What is the cost of equity raised by selling new common stock?

4. Tomboy plans to issue a $1,000 par value, 20-year noncallable bond with a 8.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 30.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

5. Barba Inc.’s common stock currently sells for $50.00 per share, the company expects to earn $2.50 per share during the current year,

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