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Corporation A and Corporation B are both expected to enjoy earnings before interest and taxes of $100,000. Corporation A will also incur $40,000 in interest expenses as a result of borrowing, while Corporation B will have no interest expense as it does not use debt financing. Instead Corporation B will pay shareholders $40,000 in dividend income. Both companies are in a 40% tax bracket. (1) What are the earnings after tax for each firm? (2) Which company has the higher after-tax earnings? (3) Which firm appears to have the higher cash flow? (4) How do you account for the difference? Please show your work.
Your computer manufacturing firm must purchase 10,000 keyboards from a supplier. One supplier demands a payment of $100,000 today plus $10 per keyboard payable.
A) If the firm's WACC is 12.1%, and the project costs $850,000, what is the NPV? B) What is the MIRR?
The Treasury bill rate is 5%, and the expected return on the market portfolio is 13%. According to the capital asset pricing model:
What is the value of the follow-on project as a real option? Suppose that the value of the follow-on investment fluctuates with a standard deviation of 50%.
The selling peice of the swing set is $1,000. How many swing sets would have to be sold for the firm to break even?
If Sterling's debt-to-equity capitalization ratio is .20 and its debt beta is also .30, what is your estimate of the firm's equity beta?
a corporate bond pays 9.75 percent interest. you are in the 29 percent tax bracket. what is your after tax yield on
Is there a significant difference between the two groups? Use the 5% significance level.
What is a reasonable distribution for the waiting time between two 911 calls during peak hours?
Calculate the repricing gap and the impact on net interest income of a 1 percent increase in interest rates for each of the following positions:
explain why the quick ratio or acid-test ratio is a better measure of a firms liquidity than the current
What is an estimate of the price of AAA-rated bond that has nine years till maturity, a face value of 1000 dollars, and an APR coupon rate of 18 percent?
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