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Your company doesn't face any taxes and has $509 million in assets, currently financed entirely with equity. Equity is worth $40.90 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below:
State Recession Average Boom Probability of State .20 .50 .30
Expect EBIT in State $59 million $109 million $179 million
The firm is considering switching to a 20-percent debt capital structure, and has determined that they would have to pay a 10 percent yield on perpetual debt in either event. What will be the level of expected EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places except calculation of number of shares which should be rounded to nearest whole number.)
a. $11.03
b. $10.60
c. $31.79
d. $16.96
Heaton Corp. sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $455,000, and its year-end receivables were $60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherw..
ABC Corp. currently has an inventory turnover of 10, a payables turnover of 7.18, How many days are in the operating cycle?
Two investment advisers are comparing performance. What is the performance measure of individual stocks?
A bank makes a loan of $200,000 and will receive payments of $1,911.30 each month for 15 years. How much (in dollars) would the bank have to charge in points (or, an origination fee) if it were concerned about the credit quality of the borrower and r..
1. explain why the present value of a cash flow stream and the asset associated therewith fluctuate in value with the
Find an article about a vertical merger - provide information from the article regarding the merger and surrounding info;
find the Macaulay duration of a standard decreasing twenty-year annuity immediate, whose present value is denoted by (Da)20.
During 2014, Koneko Cat Cafe had revenue of $130,000. Koneko had $40,000 worth of fixed costs and $30,000 worth of variable costs. Depreciation was $10,000. In addition the cafe had an interest expense of $12,000 and an average tax rate of 25%. What ..
A 4-year bond with a 6.50% coupon and a 9.50% yield to maturity is currently worth $903.87, how much will it be worth 1 year from now if interest rates are constant?
For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, The stock price has risen steadily each day for the past 30 da..
When Texaco purchased Getty Oil, many financial analysts felt that the deal made sense because it increased Texaco's market share and expanded its shrinking oil reserves. This merger exemplified the belief among the natural resource companies that bu..
If the company’s weighted average cost of capital is 10.4% per year, what is the project’s equivalent annual annuity?
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