Determine the value of tax shield acquired

Assignment Help Financial Management

Reference no: EM131552538

Remex? (RMX) currently has no debt in its capital structure. The beta of its equity is 1.86.

For each year into the indefinite? future, Remex's free cash flow is expected to equal 25 million. Remex is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a 31?% ?debt-equity ratio after the? change, and it will maintain this? debt-equity ratio forever. Assume that? Remex's debt cost of capital will be 6.11%.

Remex faces a corporate tax rate of 25?%.

Except for the corporate tax rate of 25?%,

there are no market imperfections. Assume that the CAPM? holds, the? risk-free rate of interest is 4.74.7?%, and the expected return on the market is 10.3410.34?%.

a. Using the information? provided, fill in the table below.

b. Using the information provided and your calculations in part

?(a?) determine the value of the tax shield acquired by Remex if it changes its capital structure in the way it is considering.

Reference no: EM131552538

Questions Cloud

How would you adjust your apparatus to achieve your goal : Suppose that to create an electron filter you modify the setup shown in Fig. by drilling another small hole in the left-hand plate opposite the hole.

Compute difference in absolute returns in two investment : Compute the difference in absolute returns between the two investment choices.

Non-deliverable forwards and conventional forwards : Describe one (1) difference and one (1) similarity between Non-Deliverable Forwards (NDFs) and conventional forwards.

Discuss the possible courses of action for the banks : The economic case for the bank levy" from the perspective of banks. In the face of this new levy, discuss the possible courses of action for the banks.

Determine the value of tax shield acquired : Determine the value of the tax shield acquired by Remex if it changes its capital structure in the way it is considering.

Show a positive charge q moving with velocity v : The three diagrams in Fig. show a positive charge q moving with velocity v in different directions relative to the magnetic field B.

What is the estimated value per share of your firm stock : What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock?

Coupon bond making annual coupon payment : Find the duration of an 8.5% coupon bond making annual coupon payment if it has three years until maturity and a yield to maturity of 6%.

What is amount of the earnings before interest and taxes : What is the amount of the earnings before interest and taxes for this project?

User Account

All Pages