Readable Materials Inc., a manufacturer of coated freshet and coated ground-wood paper used in catalogs, magazines, and commercial printing applications, has three bond issues outstanding. The following table describes these issues:
In addition, the firm’s 100,000 preferred shares of stock pay $0.75 per share quarterly and currently have a market price of $30 per share and a book value of $20 per share. The flotation costs for debt, preferred, and common equity are 3%, 5%, and 7%, respectively. The current price per share of the firm’s 200,000 shares of common stock is $50, but they have book value of $30 per share. The firm expects an average common dividend growth rate of 3% indefinitely and a dividend yield of 12% for the next year. The firm’s beta coefficient is 1.5 and its marginal tax rate is 40%. If the current risk free rate and market risk premium are 3% and 7% respectively, answer the following:
a) What are the book and market value weights for each source of capital?
b) What are the component costs of capital (i.e., debt, preferred equity, retained earnings, and new common equity)? Use the weighted average of the bond market values to determine the cost of debt and the arithmetic average of the dividend discount model and CAPM model for the cost of retained earnings.
c) What is the weighted average cost of capital using both the market and book value weights?
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Discuss whether silence can constitute fraud.
What will be an ideal response?
Ibis Paper Company prepared the following static budget for November
Static Budget Units/Volume 12,000 Per Unit Sales Revenue $21.00 $252,000 Variable Costs 8.00 96,000 Contribution Margin 156,000 Fixed Costs 13,000 Operating Income/(Loss) $143,000 If a flexible budget is prepared at a volume of 13,300 units, calculate the operating income at 13,300 units of production. The production level is within the relevant range. A) $172,900 B) $156,000 C) $143,000 D) $159,900
The amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the:
A) time value of money. B) present value of an investment. C) future value of an investment. D) None of the above.
Information regarding random samples of annual salaries (in thousands of dollars) of doctors in three different specialties is shown below.
?
PediatricsRadiologyPathologySample size121011Average salary120186240Sample variance161820?
a.Compute the overall mean 
.b.State the null and alternative hypotheses to be tested.c.Show the complete ANOVA table for this test including the test statistic.d.The null hypothesis is to be tested at the 5% level. Determine the critical value for this test. What do you conclude?e.Determine the p-value and use it for the test.
What will be an ideal response?