Due: Mar 2, 2023 (4:00 p.m. CST) 1. Cookie Dough Manufacturing has a target debt

Comments Off on Due: Mar 2, 2023 (4:00 p.m. CST) 1. Cookie Dough Manufacturing has a target debt

Due: Mar 2, 2023 (4:00 p.m. CST)
1. Cookie Dough Manufacturing has a target debt-equity ratio of 0.5. Its cost of equity is 15 percent, and its cost of debt is 11 percent. What is the firm’s WACC given a tax rate of 31 percent? (4 points)
2. Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding and 220,000 ten percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.15, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 91 percent of par. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm’s tax rate is 32 percent. What discount rate should the firm apply to a new project’s cash flows if the project has the same risk as the firm’s typical project? (6 points)
1) What alternative investment has the lowest possible volatility while having the same expected return as Google? (2.5 points)
2) The volatility of the alternative investment that has the lowest possible volatility while having the same expected return as Google is closest to: (2.5 points)
3) What alternative investment has the highest possible expected return while having the same volatility as Google? (2.5 points)
4) The expected return on the alternative investment having the highest possible expected return while having the same volatility as Google is closest to? (2.5 points)

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