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Problem - Capital Structure Analysis - Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $13.24 million, and its tax rate is 15%. Pettit can change its capital structure by either increasing its debt to 70% (based on market values) or decreasing it to 30%. If it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 12% coupon. If it decides to decrease its leverage, it will call its old bonds and replace them with new 8% coupon bonds. The company will sell or repurchase stock at the new equilibrium price to complete the capital structure change. The firm pays out all earnings as dividends; hence, its stock is a zerogrowth stock. Its current cost of equity, rs, is 14%. If it increases leverage, rs will be 16%. If it decreases leverage, rs will be 13%. What is the firm's WACC and total corporate value under each capital structure?
It has been said that credit terms should be extended until the marginal net revenues from increased sales equal the marginal costs of extended credit terms.
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iguana company sells a single product. iguana estimates demand and costs at various activity levels as followsunits
Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. What is the free cash flow for 2014
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Mr. Meyers wishes to know how many shares are necessary to elect 4 directors out of 12 directors up for election in the Austin Power Company.
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