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Consider an all-equity firm. The face value of the shares is 15€ and the book value of equity is 225 million euros. The company does not have own shares in treasury. The annual EBIT is 36 million euros and the firm has a pay-out ratio of 100%.
a) If there are no taxes and the required return on equity is 12%, compute the price per share and the market value of the firm.
Management is considering a change in the financing structure of the firm by issuing100M€ in perpetual debt paying interests at 7%. If the firm uses the proceedings from the debt issue to distribute an extraordinary dividend at t=0, compute again the value of the firm and the share value after the dividend is paid (assume the M&M world).
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Which is true regarding the sale of a Personal Residence?
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Levin Furniture buys a living room set with a $4,700 list price and a 50% trade discount. Freight (FOB shipping point) of $45 is not part of the list price. What is the delivered price (including freight) of the living room set, assuming a cash disco..
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Trident Corporation is currently worth $1,000,000. Its current debt-to-value (D/V) ratio is 40%. The company is confident in meeting its debt obligation, and wants to introduce more debt to take advantage of the tax shield of interest payment. What w..
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