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Submitted by SolutionGuru on Thu, 2013-08-15 13:35
due on Mon, 2013-08-19 13:35
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FIN 2030 Final Project

Part One:  Final Project 3: Cost of capital

 

Barbow Enterprises, Inc., is considering an expansion in their operations. One of the first items they want to examine is their cost of capital. According to the accounting department, the following items and their respective costs have been identified:

The cost of Common Equity: 15% The before tax cost of debt: 12% No Preferred stock They have also calculated the marginal tax rate to be 40% and the stock sells at its book value. Barbow Enterprises Inc. Balance Sheet Assets Liabilities and Owners’ Equity Cash $240 Long Term Debt $2,304 Accounts Receivable 480 Equity 3,456 Inventories 720 Net P&E 4,320 Total Assets $5,760 Total Liabilities and owners’ Equity $5,760 Required: Calculate Barbow’s after-tax weighted average cost of capital, using the data in the balance sheet above.

 

Deliverable: By Tuesday, July 2, 2013, submit the completed assignment to the W4: Assignment 2 Dropbox. Use a Microsoft Excel spreadsheet that illustrates your calculations. You may use the formulas embedded in Microsoft Excel and/or a financial calculator for these calculations. Name your document SU_FIN2030_W4_A2_part1_LastName_FirstInitial.

Part Two:  Final Project 3: Government

Securities

In this part of your Final Project, you will research and analyze current

information (that is, within the past two months) on government securities.

 

Step 1: Go to a financial Web site to do your research. The

following are three suggested sites, but you may use others. Be sure to cite

your sources!

Step 2: Research current information (within the last two

months) on the yields and maturity for:

  1. U.S. treasuries
  2. Municipal bonds
  3. Corporate bonds

Required:

  • Discuss what the pure expectations theory would imply about the yield curve.
  • Compare and contrast the yields and maturities for each of the securities.
  • Discuss which you would hold and why relative to interest rate risk.

 

Answer
Submitted by SolutionGuru on Thu, 2013-08-15 13:37
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FIN 2030 Final Project

body preview (4 words)

xxx xxxx xxxxx Project............

file1.docx preview (308 words)

Part One:  Final xxxxxxx 3: Cost xx xxxxxxx

xxxxxx Enterprises, Inc., xx xxxxxxxxxxx xx xxxxxxxxx xx xxxxx xxxxxxxxxxx xxx of xxx first xxxxx they xxxx xx xxxxxxx is their cost of xxxxxxxx xxxxxxxxx xx the accounting xxxxxxxxxxx the xxxxxxxxx items xxx their respective costs have been identified:

xxx xxxx of Common xxxxxxx 15% xxx xxxxxx tax xxxx of debt: xxx xx xxxxxxxxx xxxxx xxxx xxxx also calculated the marginal tax xxxx xx be xxx and xxx stock xxxxx xx xxx xxxx xxxxxx Barbow Enterprises xxxx xxxxxxx xxxxx Assets Liabilities xxx Owners' xxxxxx xxxx xxxx Long Term Debt xxxxxx xxxxxxxx xxxxxxxxxx xxx xxxxxx xxxxx xxxxxxxxxxx xxx xxx x&x xxxxx Total Assets xxxxxx xxxxx xxxxxxxxxxx and xxxxxxx xxxxxx xxxxxx xxxxxxxxx xxxxxxxxx xxxxxx’x xxxxxxxxx xxxxxxxx xxxxxxx cost xx xxxxxxxx xxxxx xxx data in the xxxxxxx sheet xxxxxx

xxxxxxxxxxxx xx Tuesday, xxxx xx xxxxx xxxxxx xxx xxxxxxxxx xxxxxxxxxx xx the W4: Assignment x Dropbox. Use a xxxxxxxxx Excel xxxxxxxxxxx xxxx xxxxxxxxxxx your

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file2.xls preview (65 words)

xxxxxx

xxxxxxxxxxxxxx
US xxxxxxxx xxxxx xxxxxxxxx Bonds Corporate xxxxx
xxxxxxxxThis month xxxx xxxxx This month Last xxxxxThis month Last xxxxx
x xxxx xxxx xxxxxxxx0.410.470.44
5 xxxx 0.70 xxxx 0.92 xxxx 0.92 xxxx
10 xxxx 1.75 2.04 1.77 xxxx xxxx 2.55
xx Year2.95 xxxxxxxx 3.00xxxx xxxx

xxxxxx

xx Treasury xxxxx
Municipal xxxxx
xxxxxxxxx Bonds
xxxxx curves-last month

Sheet2

xx Treasury xxxxx
xxxxxxxxx xxxxx
xxxxxxxxx xxxxx
Yeild xxxxxxxxxxx xxxxx

xxxxxx

x
x

file3.doc preview (582 words)

Government xxxxxxxxxx

Part One: Quantitative xxxxxxxxx

Barbow xxxxxxxxxxx Inc. is xxxxxxxxxxx xx xxxxxxxxx in their operations. Required information to xxxxxxx their xxxx of xxxxxxx xx the cost of Common Equity x xxxx xxx xxxxxx xxx cost xx xxxx = xxx and xxx xxxxxxxx xxx rate x 40%. xxxx we can calculate the xxxxxx xxx both Equity and xxxx xxxx their Balance sheet xxxxxxxxxxx of total Equity = $3,456 and xxxxx xxxx = $2,304.

Hence,weight of xxxxxx = $3,456 / ($3,456 x $2,304) x 0.6 or xxx xxx weight xx Debt = xxxxxxx xxxxxxx + xxxxxxx = xxx or 40%. xxx xxxxxx tax xxxxxxxx Average Cost xx xxxxxxx xxxxxx = xxxxxx x xxxx + {0.12 * (1 - 0.4) x xxxxx = xxxxxx or 11.88%.

Part Two: xxxxxxxxxx xxxxxxxxxx

To conduct a research on government securities, xxxxx of xxx I go xx a financial Web xxxx ‘xxxxxxxxxxxxxxxxx’ and xxxxxxxxx xxx xxxxxxxxx xxxxxxx information xx the yields and maturity for xxxx xxxxxxxxxxx Municipal Bondsand xxxxxxxxx xxxxx of 2 year, 5 year 10 xxxx xxx 30 xxxx

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