FIN 300 Study Guide - Final Guide: Interest, Risk Premium, Tax Shield
17 Jan 2013
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At 10:59 a. m. , the price of nexus corp. stock is on the stock exchange. At 11:00, nexus management unexpectedly announces that the firm has just struck oil in northern timbuktu (a good thing). There are no other relevant announcements during the day. At 11:01, nexus stock is selling for . 10. At 12:01, the stock is selling for . 00 on the stock exchange. At 4:00 at the close of trading, nexus stock is still selling for . 05. The interest rate on the mortgage is 6% per year, compounded semi-annually. The stock just paid a dividend of . The dividend is expected to increase by 6% per year in perpetuity. The stock"s current price is per share. It is a 20-year 5% annual coupon bond with a face value. The company"s net working capital for the year did not change. a) . 00: . 00 e) none of the above, d5/(r g)
