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ABC Inc is a pure equity firm. Firm decides to recapitalize to take advantage of tax shield. Firm's marginal tax rate is 40%. After a substantial borrowing, firm's cost of equity goes up to 10%. Assuming that firm's asset beta is 0.9, risk free rate is 2%, and EMRP is 5%, firm's post recapitalization debt ratio is closest to:
A) 42%B) 129%C) 72%D) 56%E) None of the above
What should be the prices of the following preferred stocks if comparable securities yield 7 percent? Why are the valuations different?
How many in U.S. dollars did firm save by eradicating its foreign exchange currency risk with its forward market hedge?
Assume you are the CFO of a major company who is deciding in whether to issue debt or equity in order to finance the firms operations which are growing more than 15 percent a year,
Would you realize a capital gain of capital loss from this bond? (c) Is this a premium bond or discount bond? Why?
X-1 Corp's total assets at the end of last year were $380,000 and its EBIT was 52,500. What was its basic earning power (BEP) ratio?
Neal's Nails has an 11% return on assets and a 30% dividend payout ratio. What is the internal growth rate?
When Global Partners went public in September 2008, the offer price was $22.00 per share and the closing price at the end of the first day was $23.70. The firm issued 4.90 million shares. What was the loss to the company due to underpricing.
Stock X has a standard deviation of returns of 0.6, and Stock Y has a standard deviation of 0.4. The correlation of the two stock is 0.5.
Thayer, Inc. has earnings before interest and taxes of $10,350 and net income of $2,528.50. The tax rate is 35 percent. What is the times interest earned ratio?
What is the internal rate of return of this project? 10.87% 11.57% 13.68% 15.13%
Data Back-Up Systems has obtained a $10,000, 90-day bank loan at an annual interest rate of 15%, payable at maturity. (Note: Assume a 365-day year.)
The investment banker incurs expenses of $1 million in floating the issue and the company incurs expenses of $750,000. The investment banker will receive 8 percent of the proceeds of the offering.
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