McKenzie Corporation’s Capital Budgeting Sam McKenzie

Answer for McKenzie Corporation’s Capital Budgeting Sam McKenzie $1 Only (Instant Download)


McKenzie Corporation’s Capital Budgeting Sam McKenzie

McKenzie Corporation’s Capital Budgeting Sam McKenzie is the founder and CEO of Mckenne Restaurants, Inc., a regional company Sam is considering opening several new restaurant Sally Thornton, the company CFO, ha been put in charge of the capital budgeting analysis. She has examined the potential for the company’s expansion and determined that the success of the new restaurants will depend critically on the state of the economy over the next few years, McKenzie currently has a bond issue outstanding with a face value of 525 million that is due in one year. Covenants associated with this bond issue prolubit the issuance of any ad- ditional debt. This restriction means that the expansion will be entirely financed with equity at a cost of $9 million, Sally has summarized her analysis in the following table, which shows the value of the company in each state of the economy next year, both with and without expansion Economic Growth Low Normal High Probability 30 Without Expansion $20,000,000 $34,000,000 $11,000,000 With Expansion $24,000,000 $45.000.000 $53.000.000 20

Effects of Default Risk

Default Risk

Effects of Default Risk for $3 Only (Instant Download)

Question 12 (1 pts) This question illustrates the effects of default risk on a bond’s yield to maturity. BBB Corp has a risky bond with face value of 1,000, annual coupon rate of 10%, maturity of 5 years, and an opportunity cost of capital of 11%. If bondholders exepect that there is only a 50% chance that they will receive each of the last 3 payments, what is this bonds yield-to-maturity? Enter your answer as a perecent without the “%”; round your final answer to two decimals.

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