User Account

All Pages

What is the present value of? amc interest tax? shield

Assignment Help Finance Basics
Reference no: EM133069544

In year? 1, AMC will earn ?$2,300 before interest and taxes. The market expects these earnings to grow at a rate of 3.1% per year. The firm will make no net investments? (i.e., capital expenditures will equal?depreciation) or changes to net working capital. Assume that the corporate tax rate equals 45?%. Right? now, the firm has ?$5,750 in? risk-free debt. It plans to keep a constant ratio of debt to equity every? year, so that on average the debt will also grow by 3.1?% per year. Suppose the? risk-free rate equals 5.1667?%, and the expected return on the market equals 11.367?%. The asset beta for this industry is 1.88.

a. If AMC were an? all-equity (unlevered)? firm, what would its market value? be?

b. Assuming the debt is fairly? priced, what is the amount of interest AMC will pay next? year? If? AMC's debt is expected to grow by 3.1?% per? year, at what rate are its interest payments expected to? grow?

c. Even though? AMC's debt is riskless? (the firm will not? default), the future growth of? AMC's debt is? uncertain, so the exact amount of the future interest payments is risky. Assuming the future interest payments have the same beta as? AMC's assets, what is the present value of? AMC's interest tax? shield?

Reference no: EM133069544

Questions Cloud

How much must the stock rise : Lisa Lasher buys 350 shares of stock un margin at $22 per share. If the margin requirement is 30 percent, how much must the stock rise
Find the present value of an annuity : For an interest rate of 4% compounded monthly, find the present value of an annuity of $150 at the end of each month for eight months and $175 thereafter at the
Array of experiential education opportunities : Create a starting point for learning how to network with professionals. Help to define potential career paths after graduation.
Impacting the time value of money : 1. How do you think today's low interest rate environment is impacting the time value of money? How might this change the value of an asset or liability?
What is the present value of? amc interest tax? shield : In year? 1, AMC will earn ?$2,300 before interest and taxes. The market expects these earnings to grow at a rate of 3.1% per year. The firm will make no net inv
Annual required rate of return : How much would you pay for a perpetuity that pays $100 every year forever with the first payment made 15 years from today and assuming your annual required rate
Compute the direct materials quantity variance : A company has established 6 pounds of Material J at $3 per pound as the standard for the material in its Product Z. Compute direct materials quantity variance
Calculate the implied annual interest rate : a. What is the present value of the futures contract in dollars?
What is the price of the stock of boston chicken inc : Boston Chicken, Inc. has reported earnings of $8million. It is expected that earnings will grow at 3% each year in perpetuity if the firm undertakes no new inve

Reviews

Write a Review

Finance Basics Questions & Answers

  In the context of evaluating sovereign risk which of the

in the context of evaluating sovereign risk which of the following statements is incorrect?a. bankruptcy law does not

  Offer 1- 500000 now plus 120000 for the end of year 6-15

ms. cleanair recived three offers from major automobile companies for her patent on a new hybrid drive system for

  Determine the resulting net cash flow

Determine the resulting net cash flow for each year and compute The net present value - Interpret each result in terms of the project's expected profitability

  What is projects irr

A company is evaluating 2 investment projects. Each requiring up-front expenditure of $1.5 million. The projects are expected to produce the following net cash

  Discuss the factors that influence international bond

Why do you think that the article is important in understanding diversification benefits that international bonds provide?

  Compute the expected rate of return for a stock

What is the expected rate of return for a stock that is expected to pay $1 dividend next year and is currently selling for $10.

  What would expect to happen to the price of common stock

Green Gadgets Inc. is trying to decide whether to cut its expected dividend for next year from $9 per share to $6 per share in order to have more money.

  Estimated terminal value growth rate

Now assume that the estimated terminal value growth rate is 15 percent, and the bank is only willing to loan the firm $10 million? Under these conditions

  Examine the industry which you believe is in stage two of

discuss the proposition that differences in the performance of various firms within an industry limit the usefulness of

  Is the given bond necessarily a great deal for the investors

Given the "fat" coupon, is this bond necessarily a great deal for the investors? At maturity, in August 1990, the exchange rate was actually JPY144 > USD. Was the bond a good deal for investors?

  How does depreciation enter into the calculation

How does depreciation enter into the calculation of operating cash inflows? How does the income statement format in Table 11.6 relate to Equation 4.3 for finding operating cash flow(OCF)?

  What should the current stock price of must vote

Vote, Vote, Vote Your Voice, Inc.'s major competitor, Must Vote, Inc., has been in the business for quite some time. Its net income last year was $1.3 million,

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd