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Daddi Mac, Inc. doesn’t face any taxes and has $285.60 million in assets, currently financed entirely with equity. Equity is worth $34 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 $ 6,279,000 $ 11,256,000 $ 18,312,000. The firm is considering switching to a 25-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?
Assess the growth of the firm in terms of its amount of total assets. Where have funds for growth come from? How does this relate to the firm's payout policy
The rate of inflation is expected to average 3.5% during the investment period?
How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate?
Is the number of shares outstanding linked to the volatility of the firm's stock?
What are the increased profits by adding credit sales for customers with and without credit screening?
Leasing Comment on the following remarks: Leasing reduces risk and can reduce a firm’s cost of capital. Leasing provides 100 percent financing. If the tax advantages of leasing were eliminated, leasing would disappear.
What other economic factors could be impacting the yield curve at this point in time? Real events or anticipated events?
If all factors are immobile between the corn and vehicle sectors, who gains from this change? Who loses?- If all factors are freely mobile between the corn and vehicle sectors, who gains from this change? Who loses?
Is now a good time to attempt market timing? What is an example of political risk that may impact the investment world in today’s marketplace?
ABC has been considering two mutually exclusive projects with the following NPVs and project lives.
Ratio analysis can be useful for
Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate o..
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