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River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $230,000 of debt at an interest rate of 10% and use the proceeds to repurchase 23,000 shares at $10 per share. Profits before interest are expected to be $123,000.
a. What is the ratio of price to expected earnings for River Cruises before it borrows the $230,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price-earnings ratio
b. What is the ratio after it borrows? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIP) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 0.9%, that no maturity risk premium is..
The clinic incurred $4,500,000 in general expenses and paid cash for them. The hospital received $1,000,000 in cash from a donor who temporarily restricted its use.
Make a graph with the change in the interest rate on the horizontal axis and the percentage change in stock prices on the vertical axis.
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Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$3.03 per share and paid cash dividends of ?$1.33 per share. What is the maximum price per share that Newman should pay for..
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Calculate the Earning assets to total assets, Interest margin to average earning assets, Loan loss coverage ratio and Equity to total assets for 2011, 2010, and 2009:
Suppose firm A and firm B are planning on merging. There are no costs or synergy benefits from the merger. Before the merger firm A has an issue of bonds outstanding. These bonds entitle the holder to a payment of $80 million when the bonds mature ne..
How did the Progressive era reformers respond to the excesses of rapid industrialization and urbanization? What key areas of reform did they address and were they successful?
You have just received a windfall from an investment made in a friend's business. He will be paying you $10,000 at the end of this year, $20,000 at the end of the following year, and $30,000 at the end of the year after that (three years from today)...
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