Reference no: EM13727188
At the optimal debt to capital ratio of 50%, RAD has an interest coverage ratio of 2.198.Estimate the cost of capital at the optimal debt ratio. (You can still use that the current regression beta of 2.1 to arrive at the new beta)
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What is the net advantage to leasing
: Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $50,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 9%, and the loa..
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Target capital structure
: Patton Paints Corporation has a target capital structure of 40 percent debt and 60 percent common equity, with no preferred stock. Its before-tax cost of debt is 12 percent, and its marginal tax rate is 40 percent. The current stock price is P0 = $22..
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Firms dividend policy
: To look at the firm's dividend policy, you look at RAD's financial statements for the last year. RAD, in 2013, had net income of $118 million (operating income $1,132 million), capital expenditures of $315.846 million, depreciation and amortization o..
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Residual model-dividends and payouts
: The capital budget forecast for the Santo Company is $800,000. The CFO wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how m..
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At the optimal debt to capital ratio
: At the optimal debt to capital ratio of 50%, RAD has an interest coverage ratio of 2.198.Estimate the cost of capital at the optimal debt ratio. (You can still use that the current regression beta of 2.1 to arrive at the new beta)
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Performing in the areas of profit-debt and asset turnover
: Compare and contrast the two companies in terms of how well or how poorly they are performing in the areas of profit, debt, and asset turnover. Use appropriate ratios in your analysis. Indicate strategies for possible improvement in each area. the co..
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Evaluating two different silicon wafer milling machines
: You are evaluating two different silicon wafer milling machines. The Techron I costs $228,000, has a three-year life, and has pre-tax operating costs of $59,000 per year. The Techron II costs $400,000, has a five-year life, and has pre-tax operating ..
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What is the firms cost of equity
: Eccles Inc., a zero growth firm, has an expected EBIT of $120,000 and a corporate tax rate of 35%. Eccles uses $500,000 of 12% debt, and the cost of equity to an unleveled firm in the same risk class is 16%. What is the firm's cost of equity?
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Estimate the bottom-up levered beta for rad
: RAD has 916.18 million shares outstanding today, trading at $6.67 per share. Assuming that the book value of debt on its books, which is $5.904 billion, is equal to market value (of debt), estimate the bottom-up levered beta for RAD. The firm has a m..
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