A bond has a face value (and redemption value) of $504,000, and pays coupons annually. The effective annual yield is 3 times the coupon rate. The present value of the redemption amount is 2 times the present value of the coupon stream. What is the price of the bond?

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Priyanshu PatelLv10

20 Feb 2021

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Tex-Mex by Rex, Inc. is planning its yearly budget and has the following potential independent proposals:

PROJECT OUTLAY IRR

A $5,000,000 11.0%

B $5,000,000 18.0%

C $8,000,000 16.0%

D $12,000,000 10.5%

E $12,000,000 12.0%

The firm’s capital structure shown below is considered optimal and will be maintained:

Debt $80,000,000

Preferred Stock $20,000,000

Common Equity $100,000,000

The firm has a marginal tax rate of 35% and has $5,000,000 of retained earnings available for investment. Four years ago, Tex-Mex by Rex, Inc. paid a common stock dividend of $3.75 a share. Yesterday, they paid a dividend of $5.00. Assume that this dividend growth rate continues for the indefinite future. The market price for its common stock is $82 with a beta of 1.25. Currently, the YTM on T-Bonds is 2% and the expected market return is 10%. Tex-Mex by Rex, Inc. can raise funds under the following limitations:

BONDS: New 20-year $1000 par value bonds carrying a coupon of 12% (annual) are priced to yield the investor 10% a year. Flotation costs total $70.27 per bond.

PREFERRED STOCK: Current shares of preferred stock have a dividend of $3.50 and are selling for $50 per share. Underwriters charge a flotation fee of 12% of the selling price.

COMMON STOCK: New common stock requires flotation costs equal to 13% of the stock’s price.

Calculate the before-tax Cost of Debt (Kd).

[Do not include the % sign - only input the raw numerical value; i.e., 8.2% -> 8.2; please round to one decimal place.]

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Suppose is a curve that always lies above the -axis and never has a horizontal tangent, where is differentiable everywhere. For what value of is the rate of change of with respect to eighty times the rate of change of with respect to ?

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2. (20 pts) An object begins moving along a vertical line at time t = Os and stops at time t = 6 s. Its height above the ground at time t is given by h(t) in the provided graph, where h is measured in meters. Use the graph to answer the following questions. on 0 (a) Compute the average velocity of the object on the time interval [0,6). Show your work. N 1 2 3 4 5 6 (b) Circle the choice that best describes the shape of the graph on the time interval (5,6). i. increasing and concave up ii. increasing and concave down iii. decreasing and concave up iv. decreasing and concave down (c) At what time is the object farthest away from the ground? What is the velocity at that time? time= velocity= (d) The maximum velocity attained on (0,6) occurs at one of the following times. Circle the correct choice. i. ls ii. 2 s iii. 3s iv. 4s v. 5s (e) Estimate the value of the maximum velocity attained. The value is an integer. (f) Let v(t) be the velocity at time t. Circle the greatest value amongst the following choices. i. v(2.5) ii. (2.6) ii. v(2.7) iv. v(2.8) V. (2.9) (8) List the time interval(s) on which the velocity is increasing. Use integer endpoints. (h) The maximum speed attained on (0,6) occurs at one of the following times. Circle the correct choice. i. ls ii. 2s iii. 35 iv. 4s v. 5s

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