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1. A firm is considering two different financing capital structures (CS1 and CS2). In the first capital structure CS1 the firm will issue equity which will pay expected dividends of $2 million every year perpetually, and debt of maturity 10 years that will pay expected coupons of $3 million annually (6% of facevalue of $50 million). The equity is discounted at a rate of 9.40% annually, and the debt is discounted a rate of 6% annually.
In the second capital structure the firm will issue equity which will pay expected dividends of $4 million every year perpetually, and debt of maturity 10 years that will pay coupons of $1 million annually (8% of facevalue of $ 12.5 million). The debt is discounted a rate of 8% annually. What is the rate of discount for equity in CS2?
Assume that Modigliani-Miller and its assumptions are true.
Please express your answer as a percentage.
2. The current value of a firm is 65,600 dollars and it is 100% equity financed. The firm is considering restructuring so that it is 60% debt financed. If the firm's corporate tax rate is 0.4, the typical personal tax rate of an investor in the firm's stock is 0.2, and the typical tax rate for an investor in the firm's debt is 0.7 what will be the new value of the firm under the MM theory with corporate taxes but no possibility of bankruptcy.
An inventor ponders various allocations to the optimal risky portfolio and risk-free TO-notes to construct hi's complete portefolio. How would the Sharp ratio of the complete portfolio be affected by this choice
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How can the present value interest factors for an ordinary annuity be modified to find the present value of an annuity due?
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In strategic planning, how do you conduct a SWOT analysis of an nonprofit organization and evaluate the organization from multiple sustainable perspectives
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Graser Trucking $12 billion in Assets, and its tax rate is %40. Its Basic Earning Power (BEP) ratio is 15%, and its return on assets (ROA) is 5%. What is its times-interest-earned (TIE) ratio?
Big Bank Corp. wants to earn an effective interest rate of 9% (EAR) on its consumer loans. It uses monthly compounding on consumer loans.
Assume that ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 11% and the company increases
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in 400 words respond to the following questions with your thoughts ideas and comments understanding the differences
We are evaluating a project that costs $1058174, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero.
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