Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
ABC and XYZ are identical firms in all respects except for their capital structure. ABC is all equity financed with $800,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 10%. Both firms expect EBIT to be $95,000 and all income will be distributed as dividends. Ignore taxes.
a. Richard owns $30,000 worth of XYZ stock. What rate of return is he expecting?
b. Show how Richard could generate exactly the same cash flows and rate of return by investing in ABC and using homemade leverage.
c. Now assume ABC and XYZ each pay a 20% marginal corporate tax, but Richard pays no taxes. Repeat a) and b). How is the outcome different than in a) and b)? Explain. Which firm would Richard prefer to invest in? Why?
d. Now assume ABC and XYZ each pay a 20% marginal corporate tax, and Richard pays a 15% tax on dividends. Repeat a) and b). How is the outcome different than in a), b), and c)? Explain. Which firm would Richard prefer to invest in? Why?
Determine the annual incremental free cash flow associated with each expansion plan relative to the status quo (no expansion).
What would happen to the NPV of the replacement option if Fly-by-Night uses accelerated depreciation instead of straight-line depreciation?
Enter the 1 January 2005 balances in a general ledger.- Prepare journal entries for each transaction.- Post the journal entries to the general ledger.
Dream House $1,724,000. What is the payment for your house loan for a 30 year loan with a rate 3.3%. What is the payment for your house loan for a 15 year loan with a rate 2.7% How much will you pay overall for your dream house for the 30 year loan a..
Compute the monthly payment on this loan. If the person pays an additional $500 monthly toward the principal, how many years will it take him to repay the loan?
Chris is considering buying a property that will generate a monthly net cash flow of $550 for the next 15 years.
Karsted can sell the used equipment today for $6.75 million, and its tax rate is 30%. What is the equipment's after-tax salvage value?
Describe the features of a futures contract that make it more liquid than a forward contract.- Why is fungibility an important feature of futures contracts?
Shortly after graduation, John (age 24) is considering buying a $250,000 life Insurance policy because he is planning to get married in the near future and belives that this amount is a good starting point for his needed life insurance program to pro..
Define the nominal risk-free rate (rRF) and provide an example relevant to your target audience of a specific security that can be used as an estimate of rRF.
Use the weighted average cost of capital (WACC) to find the net present value (NPV) of the project.
Based on the above transactions, compute the Time Weighted and Money Weighted rate of return for the account.
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd