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Question - A corporation is considering two plans for raising $3,000,000 to expand its operations. The first plan is to sell $3,000,000 of 6%, 10-year bonds at face value. The second plan is to sell 50,000 shares of $5 par value common stock for $3,000,000. Prior to any refinancing, the company has net income of $850,000 and 200,000 shares of common stock outstanding. Management believes the expanded operations will generate additional income of 5366.000 before interest and taxes. The income tax rate is 40%.
Required -
a. Compute earnings per share assuming the bonds are issued.
b. Compute earnings per share assuming the stock is issued.
c. Based on these computations, which plan should be advised?
d. What other factors should be considered?
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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