Discuss the difference in value of two stations

Assignment Help Finance Basics
Reference no: EM132566082

Imagine two independently owned gas stations standing next to each other and selling gas (and other goods) at about the same price, so they have the same revenues, cost structure and effective tax rate of 21%. Assume that every year they have average EBIT of $ 500,000 (I know, it's quite optimistic) without any anticipated growth. One owner finances all operations out of own pocket, while another in addition to own money also borrows $ 500,000 for five years and refinances this debt every five years without repaying principal during the time of the loan. The principal is repaid at the end by newly borrowed money (the debt is rolled over).

Discuss the difference in value (if any) of these two stations. Assume that the cash flow is relatively stable.

Reference no: EM132566082

Questions Cloud

Explain how you would conduct a job analysis in a company : Explain how you would conduct a job analysis in a company that has never had job descriptions. Utilize the O*Net as a resource for your information.
Market value of the combined company : Company A has 50 million outstanding shares at a price of $3. Company B has 30 million outstanding shares at a price of $2.
Discuss different ways to structure and organize it teams : Discuss different ways to structure and organize IT teams or departments. Why might it not be worth changing?
What elements are tangible vs intangible : What elements are tangible vs. intangible? How do the tangible vs. intangible components contribute to your satisfaction or dissatisfaction with the consumption
Discuss the difference in value of two stations : Discuss the difference in value (if any) of these two stations. Assume that the cash flow is relatively stable.
Determine the basic EPS amount : The basic earnings per share for the period ended 30 June 2018 was $1.50 per share. Determine the basic EPS amount
Investments in six stocks and the risk and returns : Please use the five companies at the end of this assignment to list their stock prices on June 1 and July 1, 2020. Compute stock return for individual stock
Which hris types your current or previous employer utilizes : Explain which HRIS types your current or previous employer utilizes. If your current or previous organization does not utilize a HRIS, which types would you.
Define the brand in terms of marketing : Define the Brand in terms of Marketing. What are Three examples of brands and companies you like and explain why you like those particular brands versus others?

Reviews

Write a Review

Finance Basics Questions & Answers

  Predicted new bond price after the interest rate change

A bond that pays interest semiannually has a 6% promised yield and a price of $1045. Annual interest rates are now projected to increase 50 basis points.

  Investors required rate of return for particular security

An issue of common stock currently sells for $50.00 per share, has an expected dividend to be paid at the end of the year of $2.50 per share.

  What do we mean by the 90-day forward exchange rate

What do we mean by the 90-day forward exchange rate? Explain.

  Explain the primary roles of the us federal reserve

Briefly explain the primary roles of the U.S. Federal Reserve, the Federal Reserve Chairman, and the Federal Reserve Board. Indicate each party's effectiveness in today's economic environment. Provide support for your explanation.

  Return over three-year period

You sell the bond three years later for $1,100. What is your rate of return over this three-year period?

  What is the inventory conversion period

What is the inventory Conversion period for a firm that has inventory of $1.5M, a tax rate of 35%. daily cost of goods sold of $300,000,and a profit margin of 1

  What is the operating income ebit for both firms

Firm A has 10,000 in assests entirely with equity. Firm b also has 10,000 in assets but these assests are financed by 5,000 in debt ( with a 10percent rate of intrests) and 5,000 in equity. Both firms sell 10,000 units of output at $2.50 percent.

  What will the percentage return on your investment

You purchase 100 shares for $50/sh ($5000), and after a year the price falls to $40. What will the percentage return on your investment if you bought the stock.

  What are the dividend policies

Dividend Policy. During 2014, 207 companies went public with common stock offerings, raising a combined total of $42.3 billion.

  What is the npv of accepting the system

What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually.

  Using all this information what is the expected return for

for walt disney company find an estimate of beta for your company. you might consider examiningusing an industry

  Draw a timeline

After that, the payments decrease by $10 every month until payments reach $0. If the nominal annuity rate of interest is 12% compounded monthly, what is the present value of this annuity? Draw a timeline and explain how you got your answer.

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd