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You currently own 250 shares of Blue Jet Inc. Blue Jet is an all equity firm that has 36,000 shares of stock outstanding at a market price of $25 a share. The company earnings before interest and taxes are $48,000. Blue Jet Inc., has decided to issue $200,000 of debt at a 9 percent rate of interest. This debt will be used to repurchase shares of stock.
i. How many shares of Blue Jet Inc. stock must you sell to unlever your position if you can loan out funds at a 9 percent interest rate?
ii. Using the homemade leverage strategy, show that you can earn the same returns on your stock if the company decided to lever its position.
Assume you have a project with the following Free Cash Flows to Equity: Now assume that you are working with an individual investor who is interested in making an equity investment in your project. She knows that you are financing the project 50% wit..
Then apply a 20% tax credit for child care expenses within limits normally allowed. How much will their final tax liability be?
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Stephen borrows $1000 at 5% for 20 years from Minglu. After 10 years, Minglu sells the rights to future payments to Aipeng for $P. Find P, if Aipeng plans to accumulate a sinking fund at 4% to replace P and desires a yield of 6%. Find the yield rate ..
Compute the value of this stock with a required return of 10 percent.
The average unlevered beta of publicly traded Sodium Chlorate businesses is 0.94. Assume zero debt beta. The target capital structure that is appropriate for Collinsville plant is 35% debt and 65% equity. Assume a risk-free rate of 9.5% and market ri..
You place an order for 320 units of inventory at a unit price of $180. The supplier offers terms of 3/15, net 30. How long do you have to pay before the account is overdue? Days until overdue days a-2 If you take the full period, how much should you ..
What would be the breakeven point if the price of the pump is $250 and the variable cost ratio is 50% of the price. The fixed cost would be about $400.000 What is the breakeven point of operations?
Draw a diagram of aggregate expenditures showing this initial equilibrium. - Show how the long-run real interest rate will change and explain your results.
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