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Daddi Mac, Inc. doesn’t face any taxes and has $310.00 million in assets, currently financed entirely with equity. Equity is worth $40 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 0.25 0.55 0.20
Expected EBIT in state $ 6,448,000 $ 11,346,000 $ 18,290,000
The firm is considering switching to a 20-percent-debt capital structure and has determined that it would have to pay an 8 percent yield on perpetual debt in either event. What will be the level of expected EPS if the firm switches to the proposed capital structure? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Calculate each company’s cash balance at the end of the year. Looking at companies A and B, which company would you prefer to own? Why?
A municipal bond is priced at par and has a coupon of 1.5% for five years. The corporate bond is also at par with five years to maturity, but carries 2.55% coupon. Sam pays taxes at the 35% level (combined and federal). Calculate the appropriate tax-..
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what is your expected 1-year holding-period return on Xyrong stock?
Storico Co. just paid a dividend of $1.30 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Cordona corp has bonds outstanding that will mature twelve years from now. what is cordonas cost of debt?
List five (5) resources to demonstrate that there is enough information available regarding your selected investment.
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