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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.
The housekeeping departmenent at ricardo clinic, a multispecialty practice in Corpus christi had 152318.00 in direct cost during last year. These costs must be allocated to three revenue producing patient serices departments using the direct meth..
Trigen Corp. management will invest cash flows of $1,263,837, $548,573, $1,448,382, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years.
A loan is offered with monthly payments and a 7.50 percent APR. What's the loan's effective annual rate (EAR)
Suppose a German company issues a bond with a par value of 1000, 15 years to maturity, and a coupon rate of 7.7 percent paid annually. If the yield to maturity is 8.8 percent, what is the current price of the bond
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Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,228,876. have a life of five years, and would produce the cash flows shown in the following table.
Write a speech that you would give to a friend in an elevator summing up the contents of this course. You have 30 to 90 seconds to inform your friend of the most important elements.
The CEO of Easy Home Sales Inc. would like to grow the company to $952,000 in sales for next year. The finance officer has compiled the data below for the current year.
Suppose you purchased one of these bonds at par value when it was issued. Right away, market interest rates jumped, and the YTM on your bond rose to 6%. What happened to the price of your bond
Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers
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