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Here are data on three firms:
Firm A: Equity $80 million; Debt $50million; ROC 15%; Cost of Capital 10%
Firm B: Equity $300 million; Debt $150million; ROC 13%; Cost of Capital 11%
Firm C: Equity $200 million; Debt $200million; ROC 18%; Cost of Capital 12%
(example of answer format: $5.00, or 5.00, or if it's negative, then -$5.00, or -5.00)
a. What is the economic value added for firm A?
b. What is the economic value added for firm B?
c. What is the economic value added for firm C?
The idea that dividend changes reflect managers' views about a firm's future earnings prospects is called the ________ hypothesis. Consider the following equation: C = P + S - PV(K) - PV(Div). In this equation, what does the term K represent?
Project K costs $75,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is 12%. What is the project's MIRR?
The firm will experience supernormal growth of 30% in next 3 years and then return to its constant growth rate of 6%. If the required return on common stock be.
By how much must the cost of capital estimate deviate to change the decision?
Tyler Trucks stock has an annual return mean and standard deviation of 11.5 percent and 45 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.8 percent and 45 percent, respectively. What is..
All of the followings are disadvantages of the modified internal rate of return (MIRR) investment rule except for:
The Great Giant Corp. has a management contract with its newly hired president. How much must the company set aside each year for this purpose?
Prove that the covariance between the minimum variance portfolio (MV) and any other portfolio equals the variance of the minimum variance portfolio. While one can rely on the specific expression for the minimum variance portfolio show this in by way ..
In 2015, a running back signed a contract worth $60.4 million. The contract called for $11.5 million immediately and a salary of $2.8 million in 2015, $8.1 million in 2016, $11.5 million in 2017, $8.7 million in 2018 and 2019, and $9.1 million in 202..
If a firm's degree of financial leverage (DFL) is 3, how will a 3% increase in earnings before interest and taxes (EBIT) affect earnings per share (EPS)?
L.A. Clothing has expected earnings before interest and taxes of $1,800, an unlevered cost of capital of 12 percent and a tax rate of 33 percent. The company also has $2,500 of debt that carries a 6 percent coupon. The debt is selling at par value. W..
What will your quarterly payment be if you sign up for this mortgage? How much will you pay in interest in your first payment?
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