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Colt Systems will have EBIT this coming year of $33 million. It will also spend $14 million on total capital expenditures and increases in the net working capital, and have $8 million in depreciation expenses. Colt is currently an all equity firm with a corporate tax rate of 30% and a cost of capital of 12%.
a. if Colt is expected to grow by 8.1% per year, what is the market value of its equity today?
b. If the interest rate on its debt is 10%, how much can colt borrow now and still have non-neg net income this camping year? c. Is there a tax incentive today for Colt to choose a debt to value ratio that exceeds 85%?
The stock of Hammond corp. has a covariance with the market return of 0.031%. The variance of the market return is 0.041%. The estimated risk free rate is 4% and the estimated market rate of return is 10%. The estimated required return on Hammond's s..
A stock has an expected return of 12.15 percent, its beta is 1.31, and the expected return on the market is 10.2 percent. What must the risk-free rate be?
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The purpose of this project is to familiarize you with the stock market - calculate the required rate of return on your stock using CAPM:BAD 350- Managerial Finance
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Explain what the standard deviation of returns is and why it is especially useful in finance, and calculate it for an asset.
Secondary Loan Company wants to purchase your mortgage from the local bank. The original loan amount was $200,000 for 30-years at an interest rate of 4%. The loan was made two (2) years ago. If Secondary Loan Company requires a 6% return, how much wo..
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Compare and contrast the two companies in terms of how well or how poorly they are performing in the areas of profit, debt, and asset turnover. Use appropriate ratios in your analysis. Indicate strategies for possible improvement in each area. the co..
Pine Tree Farms Corporation (PTFC) has a target capital structure of 20% debt, 10% preferred stock, and 70% common equity. Currently PTFC has a capital structure of 70% debt, 10% preferred stock, and 80% common stock. What is PTFC’s weighted average ..
In the Modigliani Miller perfect world with no taxes, if we assume that the effect of adding debt to firm's capital structure is exactly balanced by an increase in the cost of equity as more debt is added, what is the effect of increased debt usage o..
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