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A firm has a capital structure with $100 million in equity and $100 million of debt. The cost of equity capital is 14% and the pretax cost of debt is 8%. If the marginal tax rate of the firm is 30%,
Keenan Corp. is comparing two different capital structures. Plan I would result in 7000 shares of stock and $160,000 in debt. Plan II would result is 5000 shares of stock and $240,000 in debt. The i
Maynard, Inc., has no debt outstanding and a totalmarket value of $250,000. Earning before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal.
A firm incurs $70,000 in interest expenses each year. If the tax rate of the firm is 20%, what is the effective after-tax interest rate expense for the firm?
A firm has outstanding debt with a coupon rate of 9%, nine years maturity, and a price of $1000 per $1000 face value. What is the after-tax cost of debt if the marginal tax rate of the firm is 30%?
You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its
Interview an investor, lender (e.g., banker), or an entrepreneur, and ask him/her to describe the relevance of having a business plan with respect to obtaining funding (equity investment or a loan).
Solar Solutions reports the following account balances: inventory of $6,200, equipment of $6,200, accounts payable of $15,500, cash of $11,200, and accounts receivable of $12,400. How much does the
If it's the company's policy to always maintain a constant growth rate in its dividends, what is the ?current dividend per share
What is your estimate of the enterprise value of Carswell? What is the value of the equity of Carswell if the acquisition goes through and Smidgeon borrows $2.4 million and finances the remainder us
As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next three years in the U.S. is 2% and 3% in the euro zone. What spot exchange rate s
Ajax, Inc. has common stock outstanding that has a market price of $48 per share. Last year's dividend was $2.25 and is expected to grow at a rate of 4% per year, forever. The expected risk-free rat
Based on the following information, calculate the expected return and standard deviation of each of the following stock. Assume each state of the economy is equally likely to happen. What are the co
The beta of Microsoft's stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft s
Identify the groups that use financial statement ratios to evaluate companies. Please explain the primary emphasis of each of the groups. What ratios are the most important and why?
The company has one bond issue outstanding that matures in 20 years and has a 9 percent coupon rate. The bond currently sells for $975. The corporate tax rate is 34 percent. What is the company's we
AST Corporation has announced that its net income for the year ended June 30, 2008, is $1,000,320. The company paid a 7 percent dividend and had an EBITDA of $ 4,900,000. Its depreciation and amorti
Preferred stock of Ford Motors pays a dividend of $3.5 each year and trades at a price of $25. What is the cost of preferred stock capital for Ford?
What is the major complaint by firms concerning the Sarbanes-Oxley act of 2012? the legislative maximum allowable compensation for a CEO.
Bailey Company is considering developing a new iPhone app. The cost of development is expected to be $750,000 (all incurred in time zero) and management expects net cash flows from sale of the app
Describe and critique Target's capital-budgeting system. Give specific consideration to the role of the real-estate managers and the makeup of the CEC.
Vigo Vacations has an equity multiplier of 2.9. The company's assets are financed with some combination of long-term debt and common equity. What is the company's debt ratio? Round your answer to tw
Given the following information for Tandoori Grill Restaurant, calculate its total asset turnover and return on equity ratios: