Niendorf Incorporated needs to raise $25 million to construct production facilities for a new type of USB memory device. The firm's straight nonconvertible debentures currently yield 9.5%. Its stock sells for $25 per share, has an expected constant growth rate of 6.5%, and has an expected dividend yield of 7%, for a total expected return on equity of 13.5%. Investment bankers have tentatively proposed that the firm raise the $25 million by issuing convertible debentures. These convertibles would have a $1,000 par value, carry a coupon rate of 8.5%, have a 20-year maturity, and be convertible into 33 shares of stock. Coupon payments would be made annually. The bonds would be noncallable for 5 years, after which they would be callable at a price of $1,075; this call price would decline by $5 per year in Year 6 and each year thereafter. For simplicity, assume that the bonds may be called or converted only at the end of a year, immediately after the coupon and dividend payments. Also assume that management would call eligible bonds if the conversion value exceeded 20% of par value (not 20% of call price). At what year do you expect the bonds will be forced into conversion with a call

Chance company had two operating divisions, one manufacturing farm equipment and the other office supplies. both divisions are considered separate components as defined by generally accepted accounting principles. the farm equipment component had been unprofitable, and on september 1, 2018, the company adopted a plan to sell the assets of the division. the actual sale was completed on december 15, 2018, at a price of $600,000. the book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale. the division incurred a before-tax operating loss from operations of $130,000 from the beginning of the year through december 15. the income tax rate is 40%. chance’s after-tax income from its continuing operations is $350,000. required: prepare an income statement for 2018 beginning with income from continuing operations. include appropriate eps disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (amounts to be deducted should be indicated with a minus sign. round eps answers to 2 decimal places.)

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity.calculate the cost of new stock using the dividend growth approach.what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics.each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings.equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g

Which statement or statements are implied by equilibrium conditions of the loanable funds market? a firm borrowing in the loanable funds market invests those funds with a higher expected return than any firm that is not borrowing. investment projects which use borrowed funds are guaranteed to be profitable even after paying interest expenses. the quantity of savings is maximized, thus the quantity of investment is maximized. a loan is made at the minimum interest rate of all current borrowing.