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A company with market value of $250,000 has no debt. EBIT are expected to be $28,000 under normal economic conditions, 30% more than that if the economy is strong, but only half that if there is a recession. The company is considering raising $90,000 in debt costing 7% to repurchase stock. Currently there are 5,000 shares outstanding. Ignoring taxes:
a. Calculate EPS under each economic condition before debt is issued.b. Calculate the percentage changes in EPS when the economy goes from normal to strong and normal to recession.c. Repeat (a) assuming that the debt was issued and shares were repurchased. What do you observe?
Assume the current spot rate of the euro is $1.30 and the forward rate for the euro is $1.32, while the annualized forward premium of the euro is 3.03%. How many days is the forward contract?
Holdup Bank has an issue of preferred stock with a $6.15 stated dividend that just sold for $98 per share. What is the bank's cost of preferred stock?
Objective type questions on periodic inventory system and what is the inventory method that would result in the highest ending inventory is
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Some firms prefer to use debt or preferred stock for financing to retain control. Explain the rationale behind this method.
What major economic indicators would you examine if you were planning to make the large purchase and required a loan. Buying a new car, business equipment or house?
Write an essay and include the following questions in the paper. I would appreciate your knowledge about the questions and any personal experiences as well.
Computation of earnings before interest and taxes based on sensitivity analysis and the fixed and variable cost estimates are considered accurate within a plus or minus 6% range
You want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the..
In order to cut expenses when the dollar was at its peak, Caterpillar shifted production of small construction equipment overseas. By contrast, Caterpillar's main competitors in that area,
International investment is a prudent part of any investment portfolio. International investment helps to diversify the investment portfolio. Although, international investments are beneficial, they are not risk free.
After Year 3, dividends will grow at a constant rate of 6%. What is the stock's intrinsic value under these conditions? What are the expected dividend yield and capital gains yield during the first year?
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