What is the total return for a 20-year zero-coupon bond that is offering a yield to maturity of 8% if the bond is held to maturity?
What will be an ideal response?
For zero-coupon bonds, none of the bond's total dollar return is dependent on the interest-on-interest component, so a zero-coupon bond has zero reinvestment risk if held to maturity. The yield earned on a zero-coupon bond held to maturity is equal to the promised yield to maturity. This is because whenever one can reinvest the coupon payments at the yield to maturity, then the total return will be the same as the yield to maturity. Thus, the total return is 8%.
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Metallic Engineering, Inc., a manufacturer of fabricated aluminum products for aerospace, engineering, automotive, and custom industrial applications, is calculating its WACC. The firm’s common stock just paid a dividend of $1.5 per share and now is selling for $30. The firm’s financial staff estimates the company’s new product will generate an unusual high dividend growth rate of 17% for four years. After this period of time, the dividend growth rate will decline to 3% during a transition period of 3 years, rather than instantaneously. The firm’s debt-to-equity ratio is 3/4 and the flotation costs for new equity will be 7%. Also, the firm has a payout ratio of 60% and 20M of common shares of stock outstanding.
a) Based on the information above, determine the firm’s estimated retained earnings and the associated break-point.
b) Calculate the firm’s cost of retained earnings and the cost of new common equity. Hint: use the required rate of return kCS derived from the H-Model formula in Chapter 9 as follows:
c) If Metallic Engineering’s after-tax cost of debt is 5%, determine the WACC with retained earnings and new common equity.
The thirteen intermediate courts of appeal of the federal court system are called
a. circuit courts. b. district courts. c. claims courts. d. supreme courts.
Synchronous transmission
a. can use transmitted clock signals to time data transmission b. can use sync characters to time data tranmission c. is well-suited to large data blocks d. all of the above
Which of the following is not an advantage of having a LAN?
A. Software control D. Greater storage B. Network maintenance E. None of the above C. Information sharing