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Suppose a world without taxes. Two company, Mix Corporation and Dial Corporation are identical in every way except for their capital structures. Mix, an all-equity firm, has 200000 shares of common stock outstanding; each share sells for $30. In addition to equity financing, Dial uses leverage; the market value of Dial's debt is $3,000,000, and the interest rate on this debt is 8 percent. Both firms are expected to have EBIT (Earnings before interest and taxes) of $700,000 each year for the foreseeable future. Suppose that investors can borrow and lend at the same rate as the firms. Show that the Modigliani-Miller Proposition I holds. (Hint: Show, by the way of example, that homemade leverage is a perfect substitute for corporate borrowing).
What to the nearest cent, is the lower bound for the price of a two-year European call option on a stock when the stock price
Your boss has again asked for your help. He needs to figure out the holding period yield on a candidate bond for inclusion in a pension bond portfolio and whether your company should purchase it.
Compute the Cost of Common Stock for Benchmark Corporation given the following data, End of 1st year dividend is $20, the stock is selling for $27.
Suppose IBM is expected to pay a total cash dividend of $3.60 next year and dividends are expected to increase indefinitely by 3% a year. Suppose the required rate of return is 9 percent.
Describe the major differences in fixed exchange rate and floating rate systems. You require to compare the systems in terms of their impacts on the effectiveness of monetary and fiscal policies
Make a 700 word paper, in which you compare and contrast accounting reporting criteria (regulatory environment, issues with foreign currency, differences in GAAP, etc.) of U.S. company with foreign company.
How can using more debt impact a firm's capital structure? Discuss the trade-offs between incremental IPO proceeds and debt financing.
The Scampini Supplies Corporation recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to create net after-tax operating cash flows, including depreciation, of $6,250 each year.
Jean Splicing will receive $50,000 in 50 years or $2,000 today. If long-term rates are 7 percent, what choice would you recommend? Find out the current value of the future payments
Describe Statement showing the computation of NIC and TIC and what would the values for NIC and TIC be if the interest rate were 4.2 percent for the bonds
Suppose on January 1 you deposit $100 in an account that pays a nominal, or quoted interest rate of 11.33463%,with interest added (compounded) daily.
Assume England raised its corporate tax rate by 1 percentage point from 40% to 41%. How would this raise affect the economics of U.S.-U.K. foreign expansion project?
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