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Question - Adrian Tutoring (AT), a private company, has 500,000 shares outstanding with no debt AT's current EBIT of $500,000 is not expected to grow in the near future. If AT's stock price is $8 and tax-rate is 30%then estimate AT's weighted-average cost of capital (WACC). (5 marks) AT is considering to sell $1M of bonds and simultaneously buyback shares. Assuming debt-rate of 7%, determine the following after restructuring: Enterprise Value, Share Price and WACC.
Based on above, discuss how leverage can be advantageous and disadvantageous to common shareholders.
List three Advantages and three Disadvantages if AT were to become a Public Company.
Now suppose that AT has $400,000 of preferred shares outstanding that have a yield of 8% on par and are callable at a 5% premium. If new issues will incur 2 0/0 flotation costs, then at what interest rate would AT refinance?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
Accounting problems, Draw a detailed timeline incorporating the dividends, calculate the exact Payback Period b) the discounted Payback Period. the IRR, the NPV, the Profitability Index.
Term Structure of Interest Rates
Write a report on Internal Controls
Prepare the bank reconciliation for company.
Create a cost-benefit analysis to evaluate the project
Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
Distinguish between liquidity and profitability.
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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