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Electric Chair and Table Co. expects sales next year to be $10,000,000. Inventory increase by $300,000. The company has a profit margin of 9 percent and pays out 30 percent of profits in dividends.
Ace Industries has current assests equal to $3 million. The company's current ratio is 1.5, and its quick ratio is 1.0. What is the firm's level of current liabilities? What is the firm's level of i
Each year he will receive a bonus equal to 10 persent of his salart. Mr. Adams is expected to work for 25 years. What is the present value of the offer if the discount rate is 12 persent?
Midwest Packagings ROE last year was only 3%; but its management has developed a new operating plan that calls for a total debt ratio of 60% which will result in annual interest charges of $300,000.
The Connors Company's last dividend was $1.00. Its dividend growth rate is expected to be constant at 15% for 2 years, after which dividends are expected to grow at a rate of 10% forever. Connors' r
Apex Roofing's stock has a beta of 1.50, its required return is 14.00%, and the risk-free rate is 5.00%. What is the required rate of return on the stock market? (Hint: First find the market risk pr
Moussawi Ltd's outstanding bonds have a $1,000 par value, and they mature in 5 years. Their yield to maturity is 9%, based on semiannual compounding, and the current market price is $853.61. The bon
Tucker Electronic System's current balance sheet shows total common equity of $3,125,000. The company has 125,000 shares of stock outstanding, and they sell at a price of $52.50 per share. By how mu
Marshall-Miller considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years, and it can be depreciated according to the following rates.
Beranek Corp has $650,000 of assets, and it uses no debt, it is financed only with common equity. The new CFO wants to employ enough debt to raise the debt/assets ratio to 35%, using the proceeds fr
Construct a pro forma balance sheet that indicates the firm's optimal capital structure. Compare this balance sheet with the firm's current balance sheet. What course of action should the firm take?
In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with face value of $1 mill
Bankston Corporation forecasts that if all of its existing financial policies are adhered to, its proposed capital budget would be so large that it would have to issue new common stock. Since new st
Carter's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $72.50, what is its nominal (not effective) annual rate of return?
The stock of Columbia Sportswear Company (Symbol: COLM) is selling for $50 per share. You put in a limit buy order at $45 for one month. During the month, the stock price declines to $40 per share,
You have been assigned the task of using the free cash flow model to estimate Petry Corporation's intrinsic value. Petry's WACC is 10.00%, its end-of-year free cash flow (FCF) is expected to be $150
From a theoretical view, explain the merits and/or pitfalls of using the dividend growth model to estimate the stock price of a non-dividend paying stock.
Target capital structure: 40% debt, 10% preferred, and 50% common equity. The interest rate on new debt is 7.5%, the yield on the preferred is 7.0%, the cost of retained earnings is 11.50%, and the
Assume that Mary Brown Inc. hired you as a consultant to help it estimate the cost of capital. You have been provided with the following data: D0 = $1.20; P0 = $40.00; and g = 7% (constant). Based o
Sorenson Stores is considering a project that has the following cash flows: The project has a payback of 2.5 years, and the firm's cost of capital is 12%. What is the project's NPV?
Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue. Issuance costs are $1 million (Comparing borrowing costs) Stephens Security has two financing alternat
You own a $1,000-par zero-coupon bond that has 5 years of remaining maturity. You plan on selling the bond in one year, and believe that the required yield next year will have the following probabil
Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity
What is the present value of a perpetuity that will pay $100,000 every six months, with the first payment due 1 year from now? You may assume that the interest rate is 10% APR with semiannual compou
You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1500 two years from now, and $10,000 ten years from now.