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Which of the following statements concerning the MM extension with growth is not correct?
(a) The tax shields should be discounted at the unlevered cost of equity.
(b) The value of a growing tax shield is greater than the value of a constant tax shield.
(c) For a given D/S, the levered cost of equity is greater than the levered cost of equity under MM's original (with tax) assumptions.
(d) For a given D/S, the WACC is greater than the WACC under MM's original (with tax) assumptions.
(e) The total value of the firm is independent of the amount of debt it uses.
Duval Manufacturing recently reported the following information: Net income $ 640,000 ROA 8% Interest expense $ 192,000 Accounts payable and accruals $950,000 Duval’s tax rate is 35%. Duval finances with only debt and common equity, so it has no pref..
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Fee Founders has perpetual preferred stock outstanding that sells for $40.00 a share and pays a dividend of $5.00 at the end of each year. What is the required rate of return?
A 5-year $100 annuity due will have a higher present value than similar ordinary annuity. A 15-year, $100,000 mortgage will have larger monthly payments than an otherwise similar 30-year mortgage. An investment's nominal interest rate will always be ..
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this section provides the opportunity to develop your course project. conducting an internal environmental scan or
Suppose that 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. How much will you have in your account on October 1, or 9 months later?
A project is acceptable if the required rate of return exceeds the internal rate of return. Positive net present value projects provide returns in excess of what financial markets require. Equipment trust certificates are, in essence, a form of leasi..
Present value calculations:
Heald and Swenson Inc purchased a drill press for $850,000 one year and nine months ago. The asset has a six year life and has been depreciated according to the following accelerated schedule. The press was just sold for $475000. The firm's marginal ..
The firm is considering investing in a new project. The target debt ratio is 45%. The stockholders require a 14% return for the project’s level of market risk. If the required return on the firm’s debt is 5% and the firm’s tax rate is 20% what is the..
Hickock Mining is evaluating when to open a gold mine. The mine has 50,400 ounces of gold left that can be mined, and mining operations will produce 6,300 ounces per year. The required return on the gold mine is 12 percent, and it will cost $34.3 mil..
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