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Assume your firm is zero-growth and pays all its net income in dividends each year Also assume your firm can borrow money when it needs to at an interest rate of 7%. Currently your firm's cost of equity (Rs) is 10%, but if any money is borrowed that cost will rise to 11%. Sales this year are expected to be $500,000 and operating costs are expected to be $400,000. Your firm's effective tax rate is 40%. Given these conditions, what is the current value of your firm? What will be the new value of your firm if it takes on $100,000 in debt?
Your aunt Ruth has $500,000 invested at 6.5%, and she plans to retire. She wants to withdraw $40,000 at the beginning of each year, starting immediately. How many years will it take to exhaust her funds?
Assume Toyota has nonmaturing preferred stock outstanding that pays a $1.00 quarterly dividend and has a required return of 12% APR. Determine the stock worth?
Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio.
The firm paid a dividend of $1.00 yesterday, and dividends are expected to grow at 10 percent for two years and then at 5 percent thereafter. What is the implied cost of common equity capital for Dedus?
How do you explain this contradiction in interest rate effects and what are the big concerns going forward?
Gordon Company issued $1,000,000, ten year bonds and agreed to make annual sinking fund deposits of $80,000. The deposits are made at the end of each year into an account paying 5 percent yearly interest.
An MNE issues 10 year bonds denominated in 500,000 Philippines pesos (PHP) at par. The bonds have a coupon rate of 15 percent. If the peso remains stable at its current level of $.025 over the lifetime of bonds
Lamb Golf Accessories Limited produces a range of specialized waterproof golf shoes, in 4 different quality specifications. Deluxe 600, Palmer 20, Nicholas 360, Standard 640.
Using the data and results from the previous questions, find the expected return on Kellogg common equity according to the Capital Asset Pricing Model (CAPM).
In brief describe why borrowing is advantageous to taxes for companies, as they don't seem take on very large proportions of debt.
Suppose you can buy a warrant for $5 that gives you the option to buy one share of common stock at $14 each share. The stock is currently selling at 16 a share.
Computation of Earnings per share at the given net income in addtion to this calculate the return on investment using the Du Pont method
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