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Pabon has a P/E of 10 and a dividend of $2 per share. It has 2 m shares outstanding and $80 m of book value of equity, as well as $160 million of debt. Pabon expects to sell $20m worth of sales and have EAT of $5m and keep 40% of its profit. Furthermore, it has $240m of assets. Its tax rate is .3, and its unlevered bheta is 1. The 10 year t bond rate is 3% while the ROR in the S&P has been 13 %. Calculate Pabon’s price, if we assume that its growth rate is constant.
Why do we prepare a capital budget? What is the difference between cash flows and accounting flows within the capital budget process?
A new computer server costs $860,000, delivered and installed. Annual operating costs are $32,000. A five year life is expected with no anticipated value thereafter. Given a required rate of return of 12%, what is the equivalent annual cost of the se..
Cooke Co. is comparing two different capital structures. Plan I would result in 8,500 shares of stock and $448,500 in debt. Plan II would result in 12,000 shares of stock and $312,000 in debt. The interest rate on the debt is 9 percent. The all-equit..
The Argentina Fund has $410 million in assets and sells at a 7.1 percent discount to NAV. If the quoted share price for this closed-end fund is $17.03, how many shares are outstanding?
What is the company’s total capitalization? What is the company’s return on capital? What is the company’s after-tax operating income?
Interworld Distributors has paid quarterly cash dividends since 1980. The dividends have steadily increased from $.25 per share to the latest dividend declared of $2.00 per share. The board of directors is eager to continue this trend despite the fac..
Flynn, Inc. is considering a four-year project that has an initial outlay or cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000, and $30,000 for years 1, 2, 3 and 4, respectively. Flynn uses the internal rate of r..
Determine how frequently the company should sell the Treasury bills it owns to cover its day-to-day cash flow needs averaging €15 million a quarter
Sewing World had an all equity cost of capital of 12 percent. When the firm switched to being levered its cost of equity increased to 13.4 percent and its pretax cost of debt was 7.5 percent. What was the firm's debt-equity ratio after the switch? Ig..
The income statement for Simpson, Inc. indicates that tax expense was $30,000. The balance sheet indicates that taxes payable for the same year increased by $5,000. What amount did Simpson, Inc. actually pay in taxes during this year?
Your Christmas ski vacation was great, but it unfortunately ran a bit over budget. All is not lost: You just received an offer in the mail to transfer your $14,000 balance from your current credit card, which charges an annual rate of 21.8 percent, t..
Which of the following is the main reason why a company would prefer issuing debt over equity? A firm’s mix of debt and equity is called its:
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