Monthly Archives: June 2012

Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million

Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million. At issue is whether the expansion should be financed with debt (a … Continue reading

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Piedmont Instruments Corporation has estimated the following costs of debt and equity capital for various fractions of debt in its capital structure

Piedmont Instruments Corporation has estimated the following costs of debt and equity capital for various fractions of debt in its capital structure. Debt Fractions ki ke with financial ke with financial distress w/o agency costs distress with agency costs 0.00 … Continue reading

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Arrow Technology, Inc. (ATI) has total assets of $10 million and expected operating income (EBIT) of $2.5 million

Arrow Technology, Inc. (ATI) has total assets of $10 million and expected operating income (EBIT) of $2.5 million. If ATI uses debt in its capital structure, the cost of this debt will be 12 percent per annum. a. Complete the … Continue reading

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The stock of Alpha Tool sells for $10.25 per share

The stock of Alpha Tool sells for $10.25 per share. Its current dividend rate, D0, is $1 per share. Analysts and investors expect Alpha to increase its dividends at a 10 percent rate for each of the next 2 years. … Continue reading

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St. Joe Trucking has sold an issue of $6 cumulative preferred stock to the public at a price of $60 per share

St. Joe Trucking has sold an issue of $6 cumulative preferred stock to the public at a price of $60 per share. After issuance costs, St. Joe netted $57 per share. The company has a marginal tax rate of 40 … Continue reading

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A government’s interest expenditure as reported in its debt service fund differs significantly from its interest expense as reported in its government-wide statements

A government’s interest expenditure as reported in its debt service fund differs significantly from its interest expense as reported in its government-wide statements. What is the most likely explanation for the difference? Click here for the SOLUTION

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At what value would a government report bonds payable on its government- wide statements?

At what value would a government report bonds payable on its government- wide statements? Why might this value differ from the bonds’ face value? Why might it differ from their market value? Click here for the SOLUTION

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On July 1, 2011, Ted, age 73 and single, sells his personal residence of the last 30 years for $365,000

On July 1, 2011, Ted, age 73 and single, sells his personal residence of the last 30 years for $365,000. Ted’s basis in his residence is $35,000. The expenses associated with the sale of his home total $20,000. On December … Continue reading

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Colorado Coal Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital structure

Colorado Coal Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital structure. debt ration pretax cost cost of equity weighted average [B/(B+E)] of debt cost of … Continue reading

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Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table

(Dividend policies) Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to … Continue reading

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