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Abe Forrester and three of his friends from college have interested a croup fo venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonia. To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 86,000 shares of common stock. Plan B would involve issuing $1.5 million dollars in long term bonds with an effective interest rate of 11.6% plus $0.8 million would be raised by selling 43,000 shares of common stock. The debt funds raised under Abe and his partners plan to use a 40% tax rate in their analysis, and they have hired you on a consulting basis to do the following. A. Find the EBIT indifference level associated with the two financing plans. B. Prepare a pro forma income statement for the EBIT level solved for in part A. That shows that EPS will be the same regardless whether Plan A or B is chosen.
The company will pay a $10 per share dividend in 10 years and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 11 percent, what is the current share price
Create pro forma statements of five year projections that are clear, concise, and easy to read.XYZ Company, INC.Profit and Loss StatementYear Ended December 31, 20XX%Sales 1,750,450Returns and allowances 2,752Net Sales
What does the financial analysis process reveal and what is the goal of common-size analysis
For 2012, Everyday Electronics reported $22.5 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of investor-supplied operating capital.
Reflect on the papers. Synthesize the key points they're making and consider the challenges of such points in a given context within your environment.
What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3
You're prepared to make monthly payments of $380, beginning at the end of this month, into an account that pays 7.9 percent interest compounded monthly.
If the cost of common equityfor the firm is 17.1%, the cost of prefered stock is 9.3%, the before tax cost of debt is 7.7% and the firms tax rate is 35%, what is QM's weighted average cost of capital
You deposit 5,000 into a retirement fund at the end of each year for the next 20 years at 5% effective annual interest rate. With that accumulated fund, you then purchase a 35-year annuity-immediate
What are the allocative and distributive differences between monopoly and perfect competition. What causes these differences.
Crypton Electronics has a capital structure consisting of 44% common stock and 56% debt. A debt issue of $1000 par value, 5.6% bonds that mature in 15 years and pay annual interest will sell for $979.
Analysts project that the merger will result in incremental free flows and interest tax savings with a present value of $72.52 million, and they have determined that the appropriate discount rate for valuing Eastern Co. as a sta..
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