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Salinger Software was founded in 2012. The company lost money each of its first three years, but was able to turn a profit in 2015. Salinger’s operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2012 -$200,000,000 2013 -$150,000,000 2014 -$100,000,000 2015 $700,000,000 ? The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2012. How much tax did the company pay in 2015? a. $94,500,000 b. $87,500,000 c. $103,250,000 d. $106,750,000 e. $72,625,000.
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.8, 1.0, 1.5, and 1.7, respectively. the current cost of equity (based o..
If you were elected to choose between a fixed, freely floating or dirty floating exchange rate system, which would you choose for your home country? Why? China has a fixed exchange rate for the yuan (the currency they use for foreign trade). Many peo..
Compute the degree of operating, financial, and total leverage for firm W. Compute the relative risk of the two firms.
A 7-year annuity of 14 $8,600 semiannual payments will begin 9.5 years from now, with the first payment coming 10 years from now. If the discount rate is 10 percent compounded semiannually, what is the value of this annuity seven years and five years..
Dick Boe Enterprises, an all-equity firm, has a corporate beta coefficient of 1.5. The financial manager is evaluating a project with an expected return of 21 percent, before any risk adjustment. The risk-free rate is 10 percent, and the required r..
Assume you sell 100 shares of Bowie Corporation short at $72. You also buy a 70 call option for 5.25 to protect against the stock price going up. If the stock ends up at $90, what will be your overall gain or loss? If the stock ends up at $50, what w..
What is variance analysis? How is it used in an entity? How would a utilitarian view the facts about poverty?
Ward Corp. is expected to have an EBIT of $2,900,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $185,000, $125,000, and $135,000, respectively. What is the price per share of the company's st..
Set up a hedging strategy using the futures market. Explain the outcomes of the strategy. Assume that JPY futures have a face value of JPY100 000 per contract.
Revarop, Inc., is a fast-growth company that is expected to grow at a rate of 23 percent for the next four years. It is then expected to grow at a constant rate of 6 percent. Revarop’s first dividend, of $3.70, will be paid in year 3. If the required..
Discuss main finance theory that explains the relationship between management and equity finance provider. How should the committee address the isue of wich discount rate to use? What growth rate should be used? Calculate the Gordon growth model valu..
Buy car for $35,000. If bank will lend $30,000 (10% discount rate), what will annual payments be? Make 1st payment at end of year and make 5th and final payment at end of 5th year.
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