Finance & Accounting

Jul 4th, 2016
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Problem Assignments and Solutions - Capital Structure Calculate the correct answer in all problems USE NPV, Rate, and IRR Functions as appropriate in Problems 4b, 4d. 4e, 5, and 8 Explain in words what you do to make each calculation Explain in words what the answers mean

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Problem Assignments and Solutions - Capital StructureCalculate the correct answer in all problemsUSE NPV, Rate, and IRR Functions as appropriate in Problems 4b, 4d. 4e, 5, and 8Explain in words what the answer means.Please insert extra rows to hold your work as necessary.For this problem set, we are not going to give you the exact answer but a range within which the correct answer can be found. For example, if the problem was How much isThe correct answer is between 65 and 75 and you would need to specify the exact answer of 70.1The corporate treasurer of Gonic Manufacturing Company expects the company to grow at 4% in the future. She notes that debt will have an interest rate of 4% interest an35%. She believes that debt will be a cheaper option to finance the growth. The current market price per share of its common stock is $19, and the expected dividend in onCalculate the cost of the company's retained earnings and check if the treasurer's assumption is correct.The range for the cost of debt is between 2% and 10%The range for the cost of retained earnings is between 2% and 10%Cost of debtCost of company retained earnings2.60%7.95%The treasurer's assumptions are correct. Cost of debt indicates about the cost that will be incurred by the company if they are raising debt to finance their capital and cost of retainearnings indicates about the cost of raising fund using equity.2-AThe risk-free rate on 30 year U.S. Treasury bonds is 2.75%

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