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Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. To finance the new venture two plans have been proposed:• Plan A is an all-common-equity structure in which $2.2 million dollars would be raised be selling 84,000 shares of common stock.• Plan B would involve issuing $1.3 million dollars in long-term bonds with an effective interest rate of 11.8% plus $.9 million would be raised by selling 42,000 shares of common stock. The debt funds raised under Plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firm’s capital structure.Abe and his partners plan to use a 34% tax rate in their analysis, and they have hired you on a consulting basis to do the following:
a. Find the EBIT indifference level associated with the two financing plans.b. Prepare a pro forma income statement for the EBIT level solved for in Part a. that shows that EPS will be the same regardless whether Plan A or B is chosen
Describe the five principles of crisis action planning in organizational crisis management.
the target capital structure for jowers manufactoring is 47 common stock 10 prefered stock and 43 debt. if the cost of
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You have evaluated the following probability distributions of expected future returns for Stock X and Stock Y, determine the expected rate of return for Stock X and Stock Y?
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Describe how financial intermediaries affect the availability of financing for corporations and determine the impact you think the Internet will have on the activities and importance of intermediaries.
Assume you want to run a computer program to derive the efficient frontier for your feasible set of stocks. What information must you input to the program?
Investment Decision Rule Problems : - A $25 investment produces $27.50 at the end of the year with no risk. If the OCC = 10% annually is this a good investment?
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