Retaining the cash beneficial

Assignment Help Finance Basics
Reference no: EM133060889

Firm A has 200 million in cash that it can use for share repurchase. Suppose instead that Firm A invests the funds in an account paying 5% interest for 1 year. Corporate tax rate is 35%, individual capital gains rate is 15% and individual rate on ordinary income is 30%.

Firm A retained the 200 million in cash so that it would not need to raise new funds from outside investors for an expansion it has planned for next year. If it did raise new funds, it would have to pay issuance fees. These fees can be expensed for corporate tax purposes, the amount that Firm A needs to save in issuance fees to make retaining the cash beneficial for its investors is closest to:

  • - 7 mill
  • - 5 mill
  • - 2.5 mill
  • - 2.2 mill

Reference no: EM133060889

Questions Cloud

Foreign exchange section of a current issue : EXCHANGE RATES: Use the foreign exchange section of a current issue of The Wall Street Journal to look up the six currencies in problem 19-5.
Calculate the net gain : In May 2012, a bank will issue a 4/7 FRA referenced to BBSW with a guaranteed rate of 4.5% p.a.. Bank bill futures for September 2012 delivery are priced at 95.
Treasury bond futures : Ms. Yao is a portfolio manager who is responsible for a $200 million portion of the bond portfolio of Himalaya's pension fund. The current investment guidelines
Discussing content of american foreign policy : What themes matter when discussing the content of American foreign policy? How have you been involved in civic engagement?
Retaining the cash beneficial : Firm A has 200 million in cash that it can use for share repurchase. Suppose instead that Firm A invests the funds in an account paying 5% interest for 1 year.
Exclusive investments all show about the same npv : Can you determine whether an investment is warranted based solely upon the NPV? If three mutually exclusive investments all show about the same NPV, how might y
Agreement with the bankruptcy courts : Thirty days ago Tabby signed an agreement with the bankruptcy courts requiring her to make three payments of $400 plus interest in 30, 60, and 90 days, respecti
Foreign or domestic terrorists : What else could U.S. leaders do to make sure that the general public is safe from either foreign or domestic terrorists?
What is bank a standard deviation : What is Bank A's standard deviation of its asset allocation proportions relative to the national banks average?

Reviews

Write a Review

Finance Basics Questions & Answers

  Describe how hedge funds create economic value

Describe how hedge funds create economic value. Does this help or hinder the goals of monetary policy? How could they cause financial instability?

  Do you agree or disagree with this statement explain how

consider the following while accrual accounting information is imperfect ignoring it and making cash flows the basis of

  Expected to pay a dividend

If you pay $55 for a share of common stock that has a constant growth rate of 6% and it is expected to pay a dividend of $1.25 what would be your return

  What are the ethics of the alternatives

Your client, Nate Matthews has two families: a wife and children as well as a girlfriend who is the mother of his additional children.

  Evaluating the company weighted average cost of capital

What is the company's weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places).

  Explain why you chose two of your securities

Explain why you chose 2 of your securities. Discuss your alpha, beta and Sharpe measures for your portfolio and what they mean about how your portfolio performed.

  Format a formal business-financial plan

You need to format your final project just as you would format a formal business/financial plan for your company. Make sure your business/financial plan.

  Coupon bonds and non-coupon bonds

What are the differences between coupon bonds and non-coupon bonds?

  Desired retirement income stream

How much will you need in your retirement account at age 65 to fund this desired retirement income stream?

  At what level of sales should the firm be willing to abandon

Brewster's is considering a project with a 5-year life and an initial cost of $120,000. The discount rate for the project is 12 percent.

  What is the value of the fund today

Your brother, who is 6 years old, just received a trust fund that will be worth $21,000 when he is 21 years old. If the fund earns 0.11 interest compounded

  Yu have been provided with the following data d0 120 p0

assume that mary brown inc. hired you as a consultant to help itestimate the cost of capital. you have been provided

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd