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Establishment Industries borrows $900 million at an interest rate of 8.6%. Establishment will pay tax at an effective rate of 35%. What is the present value of interest tax shields if:
a. It expects to maintain this debt level into the far future? (Enter your answer in millions of dollars.)
b. It expects to repay the debt at the end of 6 years? (Enter your answer in millions of dollars rounded to 2 decimal places.)
c. It expects to maintain a constant debt ratio once it borrows the $900 million and rAssets = 10% (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 1 decimal place.)
it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?
Bradbury Breathe Easy Corporation has annual sales of 3,750,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $117,900 in interest. What is the profit margin if the tax rate is 38 percent?
What is a consol and why do changes in market interest rates have a larger impact on its value than 10-year bonds?
If these bonds have a market price of $1,050, what yield to maturity is being implied in the pricing?
What is your after-tax “cost of money” (taking into account that the interest payments on the bonds are tax-deductible)
Calculate the value of a preferred stock that pays a dividend of $8.00 per share when the market's required yield on similar shares is 13 percent.
Bank of America's Consumer Spending Survey collected data on annual credit card charges in seven different categories of expenditures:
What is the aftertax salvage value of the fixed asset? What is the operating cash flow of the project?
In addition to the tax shield offered by governments around the world, debt has a lower required rate of return than equity - explain why this is so? Given the inherent tax shield advantages why might we still come across 100% Equity financed firms?
An investor decides to purchase shares of BUFF on margin. Below what stock price will the investor receive a margin call?
What tax rate is required to meet the budgetary demands?
In 2008, Paulson formed DP Manufacturing as his own business to make components for the bearing pullers and sell the parts to BPI.
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