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Firms A and B are identical for their level of debt and the interest rates they pay on debt. Each has $3 million in assets, $400,000 of EBIT, and has a 30% tax rate. However, firm A has a debt-to-assets ratio of 70% and pays 12% interest on its debt, while Firm B has a 20% debt ratio and pays only 8% interest on its debt. What is the difference between the two firms' ROEs?
The agency problem can seriously restrain the economic success of a corporation. What avenues are available to shareholders to bring their aims and those of organization into alignment?
Assume the market risk premium is 6.5% and risk free interest rate is 5%. Compute the cost of capital of investing in project with beta of 1.2.
Suppose that the current value of a certain asset is $45000. The annual effective rate of interest is 4.5%. You are offered a 2 year long forward contract at a forward price of $50000. How much would you need to be paid to enter into this contract..
Of Sharpe's sales 10 percent is for cash, another 60% is collected in the month following sales, and 30% is collected in the second month following sales.
XYZ Corporation stock has a 50% chance of producing a 30% return, a 25 percent chance of producing a 9% return, and a 25% chance of producing a -25 percent return.
Do you think it is a good idea for a corporations to have liabilities (debt) when running their business? Explain your answer.
The machine falls into the MACRS 3 year class life category. Assume a tax rate of 30% a discount rate of 12%.
A Corporation will pay a $2 per share dividend in one year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% each year thereafter.
Suppose you are CFO for your company and you have been given the task of financial planning for a new product to increase corporate earnings each share.
Computing the cash break-even level of output where you are considering a new product launch
Medtrans is A profitable company that is not paying a dividend on its common stock. James Weber, an analyst for A. G. Edwards, believes that Medtrans will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6 perc..
Which of these features benefits small shareholders?
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