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Company - entirely equity financed 18 million shares of common stock outstanding Stock = $37.50 per share Wants to purchase land for $105 million. Purchase will increase company's annual pretax earnings by $21.5 million in perpetuity. Company's current cost of capital is 10.5% Company can issue bonds at par value with a 7% coupon rate Capital structure in the range of 70% equity/30% debt is optimal. Company is 40% corporate tax rate. If company issues equity to finance purchase, what is NPV? what is market value balance sheet after purchase is financed with equity? What is price per share of stock (after) and how many shares will need to be issued? If company decides to issue debt to finance purchase: what will market value be? What would market value balance sheet be?
Which of the following statements reflects the doctrine of pre-emption?
Mr. Smith, Esq. purchased a new house for $90,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 11 percent compound interest on the unpaid balance. What wil..
When you do your research on mutual fund performance, you need to consider the fact that only unsuccessful investment strategies are made public. What is the effect of this fact on your research about the mutual fund performance? (I.e., will the perf..
If the equity requirement is 10 percent and a mortgage can be obtained for 25 years at 5 percent. If the loan to value ratio is 70 percent (equity is 30 percent), what is the value of a property that generates $125,000 in net operating income. Hint, ..
What is the present value of the following annuity? $3346 every half year at the end of the period for the next 15 years, discounted back to the present at 19.78 percent, per year, compounded SEMIANNUALLY.
Project A has an initial cost of $80,000 and provides cash inflows of $34,000 a year for three years. Project B has an initial cost of $80,000 and produces a cash inflow of $114,000 in year three. The projects are martially exclusive. Which project(s..
A firm's net income before tax, EBT [NIBT] (on the income statement) is affected by _____. Larry wants to buy a house priced for $325,000. The FHA requires a 2% downpayment and will make a mortgage loan at 3.5% for 30 years [monthly payments]. In ev..
Target cost = $10,000,000, target profit = $850,000, target price = $10,850,000, sharing formula is 70/30 (buyer 70%, seller 30%), and ceiling price = $11,500,000. Assume that the seller completes the work at an actual cost of $10,050,000. What is th..
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..
Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $178,800, how many dollars of revenue must the company generate in order to reach the break-even point?
One thousand dollars is borrowed for one year at an interest rate of 1% per month. If the same sum of money could be borrowed for the same period at an interest rate of 12% per year, how much could be saved in interest charges?
X Company's accountant made adjusting entries at the end of the period for the following reasons: As a result of these entries, total equities decreased by_____
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