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Lo Corp. is comparing two different capital structures. Plan I would result in 8,000 shares of stock and $80,000 in debt. Plan II would result in 6,000 shares of stock and $120,000 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $50,000. An all-equity plan would result in 12,000 shares of stock outstanding. Ignore taxes.
What is the price per share of equity under Plan I? Plan II? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Universal Air is a no-growth firm and has two million shares outstanding. It expects to earn a constant $20 million per year on its assets. If it has no debt, all earnings are paid out as dividends, and the cost of capital is 10%, calculate the curre..
A reverse annuity mortgage is made with a balance not to exceed $300,000 on a property now valued at $700,000. The loan calls for monthly payments to be made to the borrower for 120 months at an interest rate of 11% MEY. No payments are made thereaft..
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 12 percent, and that the maximum allowable payback and discounted payba..
A project analyst estimates that a proposed project will have an expected return of 16%, which is higher than the Minimum Acceptable Rate of Return demanded by the corporation. Under what conditions this decision might be warranted? Under what condit..
The Flowering Vine buys hanging plants for $2 each and resells them for $8.95 each. The firm sells 3,500 plants per year. Generally, the firm orders 400 plants at a time and has a fixed cost per order of $28.
Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
"Competitive Bidding and Long-Term Cost Savings" Please respond to the following: From the e-Activity, take a position on whether competitive bidding provides long-term cost savings when Medicare patients are being limited to the use of the lowest bi..
Bound Returns. You buy an 8% coupon, 20-year maturity bond when its yield to maturity is 9%. (Assume semiannual coupon payments.) Six months later, the yield to maturity is 10%. What is your return over the 6 months?
Ranyard's beta is 1.04, and the last dividend per share paid was $3.92. The market risk premium is estimated to be 7.82%, and the real rate of interest is 2.18%. The liquidity risk premium is 0.9%. Analysts expect the company to grow at a rate of 3.6..
A company must pay liabilities of $19000 and $11000 at the end of years 1 and 2, respectively. The only investments available to the company are 1 and 2 year zero coupon bonds with yields 6% and 7%, respectively. Calculate the cost to the company tod..
Cost of goods sold is 60% of sales. Purchases are made and paid for two months prior to the sale. 40% of sales are collected in the month of the sale. 40% are collected in the month following the ale, and the remaining 20% in the second month followi..
Lumber liquidator has two options for short term loan. 1. Committed line of credit with a rate of 3.1% per quarter. 2. no recourse factor who is will to buy their receivable. Lowes has an average collection period of 65 days. What is the maximum fact..
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