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The Ensyder Trading Company (ETC) is a zero growth firm with an EBIT of $250,000 and a corporate tax rate of 40%. ETC uses $1 million of debt financing and the cost of equity of an unlevered firm in the same risk class is 15%. The personal tax rates of ETC's investors are 30% on interest income and 20% (on average) on income from common stock.
a) Explain what is the value of ETC according to MM with corporate taxes?
b) What is ETC's value (rounded to the nearest 1000) according to MM (including personal taxes)?
Dayco operates industry average ratios are these: return on assets: 11%; asset turnover: 2.5 times; Net profit margin: 3.6 %. Compare Dayco's performance against the industry averages.
Obtain cash flow statements of Wal-Mart for the last two years for the publicly traded company and select two performance ratios and two coverage ratios for cash flow analysis that you think will be most effective.
Discuss at least two challenges the budget analyst should consider when preparing a trend analysis over a five-year period. Justify your response.
How can you explain the fact that as the discount rate increases, the present value of a cash flow decreases? Why do I value a cash flow less, when discount rate goes up? How is a present value associated with risk?
Assume you issued a 90-day forward contract to exchange 100,000 New Zealand dollars into U.S. dollars. How many U.S. dollars are involved?
The present value of the following cash flow stream is $6,785 when discounted at 10 percent annually. Find the value of the missing cash flow?
The money has not been touched since a first deposit was made exactly six years ago. If the most recent deposit was made today, how much money is currently in the account?
How would economic transactions between suppliers of funds (e.g., households) and users of funds (e.g., corporations) occur in a world without FIs?
using the proceeds to purchase another stock with a beta of 1.35. What will the portfolio's new beta be after these transactions? Round your answer to two decimal places.
If Jill replaces Stock A with another stock, E, which has a beta of 1.30, what will the portfolio's new beta be?
Do you feel that it is possible to create a universal set of ethical standards for business, or do you believe that cultural differences make universal standards impractical or impossible?
Assume that the risk-free rate is 5 percent and the market risk premium is 6 percent. What is the expected return for the overall stock market? What is the required rate of return on a stock that has a beta of 1.2?
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