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Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $350,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, and the firm's tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt ratio. Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the capital structure?
How to determine the future value of an investment made today. How to determine the present value of cash to be received at future date.
What is the initial cash outlay for this replacement project? What is the operating cash flow of the project?
Morin Company's bonds mature in 8 years, have a par value of $1,000, What is the bond's price?
In the model of exchange rate and output determination, explain how to derive the relationship between output and nominal exchange rates in both the output and the asset markets. Plot these relationships in one graph and explain the equilibrium condi..
Consider a firm that has assets worth $1,000,000 today. It has a single zero-coupon debt issue with face value $800,000 and a time-to-maturity of five years. What is the risk-neutral probability that the firm will survive to T = 5? What is the value ..
Common stock value-Variable growth Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $2.94 per share and paid cash dividends of $1.24 per share (D_0 = $1.24). What is the maxi..
What is the present value of the cash flows?
Assume that the opportunity cost is 10%.
A firm currently has no debt. The firm has 15 million shares outstanding and those shares currently have a market price of $25 per share. The firm is contemplating selling $50 million in bonds and using the proceeds to repurchase shares of stock. do ..
Suppose that the interest rate on a taxable corporate bond is 5.20 percent and that your marginal tax rate is 32 percent.
An investor earns dividends of $450 during the course of the year. At the end of the year, the stock is worth $10,700. The capital-gains yield on the stock was 8 percent. At the beginning of the year, the stock was worth?
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from toda..
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