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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 2.3 million dollars would be raised by selling 84,000 shares of common stock. Plan B would involve issuing 1.1 million dollars in long term bonds with an effective interest rate of 11.7% plus a 1.2 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 firms capital structure. Abe and his partners plan to use a 40% 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 Plan B is chosen?
In an effort to raise money, a company sold a bond that now has 20 years of maturity-what component of debt should be used in the WACC calculations?
Size of Accounts Receivable- Tidwell, Inc., has weekly credit sales of $19,400, and the average collection period is 34 days. The cost of product is 75 percent of the selling price. What is the average accounts receivable figure?
On August 19, 2004 Google issued its IPO of 19.7 million shares to the initial investors at $84.63 per share. The closing price of the stock that same day was $100.08. What was the dollar value of the underpricing associated with the Google IPO?
1real cash registers can handle both bills and coins. design a single class that expresses the commanality of these
Question 3 :Restful Industries has offered $12 million cash for all the ordinary shares in Sofa Distribution Pty Ltd. Based on recent market information, Sofa Distribution is worth $8 million as an independent operation. If the merger makes economic ..
andrew and stephanie wilson are a young couple about to buy their first home. they have beennbspmarried for five years
Fixed costs that change for activity outside relevant range would include-When gross margin pricing is employed, the markup percentage includes
ow might the bank be able to involve its own customers in designing its web site and pricing its Internet service package?
If biggie mart could earn 3.5% on its marketable securities, how much would the firm earn per year from such an arrangement?
You buy 600 shares of stock at a price of $86 and an initial margin of 75 percent. If the maintenance margin is 40 percent, at what price will you receive a margin call?
After a 5-for-1 stock split, the Strasburg Company paid a dividend of $0.75 per new share, which represents a 9% increase over last year's pre split dividend. What was last year's dividend per share?
Each year, rare coins increase in price at a three percent rate. She believes that if she invests her money for one year, she should be able to buy 26 coins for what 25 coins would cost today. What is her real interest rate or reward for waiting?
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