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Unformatted text preview: and currently pays 9 percent for its negotiated financing. (a) Calculate the cash conversion cycle before and after the lockbox system. (b) Calculate the savings in financing costs from the lockbox system. 3. Columbia Gas Companys (CG) current capital structure is 35% debt and 65% equity. . This year the company has earnings after tax of $5.1 million and is paying $1.6 million in dividends. To finance a transmission pipe line, CG can borrow $2 million at a cost of 10%, the same rate that CG is currently paying on a total of $15 million long-term debt. CG has 1,000,000 shares outstanding and and its current market price is $31. If CG's long term growht rate of dividends is expected to be 8% what is the weighted cost of capital for the firm? Assume a marginal tax rate of 40%...
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- Summer '11