Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The Lopez-Portillo Company has $10.9 million in assets, 90 percent financed by debt and 10 percent financed by common stock. The interest rate on the debt is 6 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $19.5 million in assets.
Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 7 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 40 percent.
a. If EBIT is 7 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives. (Round your answers to 2 decimal places.)
Current _______
Plan A ________
Plan B ________
b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2 decimal places.)
c. If stock could be sold at $20 per share due to increased expectations for the firm’s sales and earnings, what impact would this have on earnings per share for the two expansion alternatives? Compute earnings per share for each. (Round your answers to 2 decimal places.)
Plan A _______
Plan B _______
ABC Corp is a public company and announces its intention to raise $300 million by selling new shares. What do market signaling studies suggest will happen to the firm's stock price on the announcement date? Why?
Mary is going to receive a 32-year annuity of $8,700. Nancy is going to receive a perpetuity of $8,700. If the appropriate interest rate is 10 percent, how much more is Nancy’s cash flow worth?
Carlson Enterprises' common stock dividend is expected to grow at 2% per year. What is the estimated value of the common stock?
The real risk-free rate is 3%. Inflation is expected to be 3.05% this year, 3.8% next year, What is the yield on a 7-year Treasury note?
You have just invested a one-time amount of $6,000 in a stock-based mutual fund. How much will your investment be worth in 23 years?
You have a choice of borrowing money from a finance company at 25 percent compounded quarterly or borrowing money from a bank at 27 percent compounded annually. Which alternative is the most attractive? If you can borrow funds from a finance company ..
Firm XYZ is trying to determine the optimal amount of cash to obtain when required. The opportunity cost of holding cash is 2.75% annually, and the firm has determined that a minimum cash balance (or safety stock) of $1000 is optimal. What will be t..
compute the required estimated tax payments for 2016 tax in each of the following circumstances.
What is the value today of a 15-year annuity that pays $690 a year? The annuity's first payment occurs six years from today. The annual interest rate is 12 percent for Years 1 through 5, and 14 percent thereafter.(Do not round intermediate calcula..
This year, the company paid a dividend of $2 a share. The company adheres to a constant rate of growth dividend policy.
Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes
Common stock X pays a dividend of $100 at the end of the first year, with each subsequent annual dividend being $10 more than the preceding one. Alice purchases the stock at a theoretical price to earn an expected annual effective yield of 10%. Immed..
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd