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Capital Structure. Here is a simplified balance sheet for Epicure Pizza (figures in $MM) Current assets 80 Fixed assets 125 Total 205 Current Liabilities 60 Long term debt 65 Equity 80 Total 205 Note: There are 16 million shares outstanding. Epicure shares are currently priced at $12 each. a. You wish to calculate Epicure's WACC. What is the relevant debt figure for the company's debt ratio? b. You now realize that since Epicure issued its debt, interest rates have fallen substantially. Do you need to revise your measure of the debt ratio upward or downward?
You need to choose between making a public offering and arranging a private placement. In each case the issue involves $10.9 million face value of 10-year debt. You have the following data for each: A private placement: The interest rate on the priva..
A $1,000 face value bond of Acme Inc. pays an annual coupon, carries a coupon rate of 7.25%, has 31 years to maturity, and sells at a yield to maturity of 6.45%. (a) What interest payments do bondholders receive each year?(b) At what price does the b..
What is cost of equity and how does it function in the cost of capital? To increase a firm’s value, results should show your WACC is moving in which direction? What are those skills?
A firm has sales of $173,000, total assets of 160,000, net income of $15,000, and dividends paid of $3,000. What is the internal growth rate?
Assume that today is December 31, 2014, and that the following information applies to Vermeil Airlines: After-tax operating income [EBIT(1 - T)] for 2015 is expected to be $600 million. Using the corporate valuation model approach, what should be the..
Next year ABC healthcare organization will serve 100 patients in the following manner. 30 Medicare Patients who pay charges less 30%/diagnosis. 20 Medicaid patients who pay charges less 30% per diagnosis. Calculate the increase in volume necessary to..
Klingon Empire Pharmaceuticals is expecting a growth rate of 14% for the next two years due to its new flu preventive drug, Katterracsin. Thereafter it should level to an 8% growth rate. The last dividend paid was $.65 per share. What price should th..
If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion, what is the balance on the capital account assuming no statistical discrepancy?
The CFO of Daves Industries plans to have the company issue $300 million of a new common stock and use the proceeds to pay off some of its outstanding bonds that carry a 7% interest rate. Assume that the company, which does not pay any dividends, tak..
Cal Lury owes $38,000 now. A lender will carry the debt for seven more years at 8 percent interest. That is, in this particular case, the amount owed will go up by 8 percent per year for seven years. The lender then will require that Cal pay off the ..
Compute the net advantage to leasing. In general, what effect would the use of accelerated depreciation, such as MACRS, have on the answer to part a? What alternative, leasing or owning, should be chosen?
What are capital expenditures, and how can they help a company achieve its long-term objectives?
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