Study Session 10: Corporate Finance: Corporate Governance, Capital Budgeting, and Cost of Capital
Hi everyone. I need help with an assignment for class. I’m try to solve the problem while using a ba ii plus calculator and I’m not sure if I’m doing it correctly.
Cost of Debt:
30 year Bonds
Current Price 105.5%
7.6% Coupon Rate
Semi Annual Bond
5 years to Maturity
Tax Rate is 40%
What is the cost of debt?
In the calculator, I put…
N = 10
I/Y = ?
PV = -1055
Pmt = 38
FV = 1,000
A two-year 4% Treasury Note has 12 months to expiry. The Note pays semiannual
coupons (hence there are two coupon payments left). Assume that you know the following:
Price of the 6-month T-Bill is 98.6527
The 6-month forward rate is F(6m; 12m) = 3:25%
(a) According to the pure-expectations theory of the term structure of interest rates, how
should the 6-month spot rate evolve?
(b) What is the arbitrage-free price of the 4% T-Note?
(c) What is the yield to maturity of the 4% T-Note?
Can someone please explain this particular portion of the problem D/(D + E) = 0.8033/1.8033 = 0.445. given the following
Before-tax cost of new debt
Target debt-to-equity ratio
Next year’s dividend
Estimated growth rate
I want to invest in a new company and so I want to calculate the free cash flow and hence the IRR of it
I use the typical formula in which EBIT *(1-T)+depreciation-change in working capital- capex = free cashflow
But in one of the cost item of this company, it is a management fee (assume it is $100) which is payable to me every year as the new shareholder of this company
and how should this management fee be accounted for? should it add back into the above free cashflow formula?
thank you for any advice
Is the only way to calculate NPV by hand, by discounting each individual cash flow one by one, totaling, and subtracting the initial amount of equity that was raised? Click this link to view an answer explanation for a module quiz from Kap; if anyone can explain how to do this on the TI BA II I would appreciate it:
I’m studying Corporate Finance and I’m thinking about this problem.
Say, a company has 0 debt, no bonds, they borrow nothing… so, we will calculate WACC = (E/V) x Re right?
But, they have current liabilities. So what now? E/V = E / (Equity + current liabilities) ? Or something?
Hi, I am having some issues calculating the cost of debt for the below :
Currently outstanding bonds $2.4 million five-year bonds, coupon of 12.5 percent, with a market value of $2.156 million
The solution presented in the curriculum is as follows :
For debt: FV = 2,400,000; PV = 2,156,000; n = 10; PMT = 150,000
Solve for i. i = 0.07748. YTM = 15.5%
However , I am not getting the 0.07748 but a negative rate.
please help :)
Is the discount rate used to discount cash flows an effective rate or a nominal rate?
Hello guys, a friend of mine ,giving the l1 exam on June, asked me about the questions of l1. He asked if a question could be a combination of different study sessions,
For example.If i have to calculate the growth rate on Corp Finance which is (1-D/EPS)xROE and the ROE is not given but i have the following information ……Net Income = x and AVG Equity = y so ROE = x/y………..But this ratio is given on FRA and not on Corp Finance. So is each section a thing of its own or there can be questions that you have to combine knowledge from many study sessions?
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