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Ward Corp. is expected to have an EBIT of $2,650,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $180,000, $115,000, and $130,000, respectively. All are expected to grow at 17 percent per year for four years. The company currently has $20,500,000 in debt and 850,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 9.5 percent and the tax rate is 35 percent.
What is the price per share of the company's stock? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .63. It’s considering building a new $65.3 million manufacturing facility. If the tax rate is 38 percent, A new issu..
What is the main premise underlying the pecking order theory? What is the “pecking order” of sources of financing? Why is dividend policy so important to this theory? How does the concept of financials slack relate to this theory?
A cement manufacturer has supplied the following data: What is the company's unit contribution margin?
If a firm’s management anticipates financing a project with a capital mix that is different from its current capital structure describe how the firm is subjecting itself to a calculation error if its historical WACC is used to evaluate the project.
Managers should determine which product is more profitable to process beyond the split-off point. What are some nonfinancial issues that a company should consider regarding its processing decisions?
The grade appeal process at a university requires that a jury be structured by selecting seven individuals randomly from a pool of 13 students and 13 faculty. What is the probability of selecting a jury of all students? what is the probability of sel..
A Virginia-based entrepreneur believes that joining Kinloch Golf Club will allow for profitable networking opportunities, thus improving her business. But she wonders if it is worth the costs of joining. Ignore any utility she receives from the enjoy..
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 6.6 percent coupon bonds are selling at a price of $680.73. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answ..
You are the financial manager of a firm that is contemplating investing in a new project that you expect will generate cash flows of $10,000 per year for five years and then $15,000 per year for another two years. Explain the process for evaluating t..
Mary is running a retirement community and is negotiating with a client, Jimmy, who wishes to reside at Mary’s community when he retires in ten years at age 65. Actuarial statistics indicate that Jimmy will probably die at age 90. Calculate the prese..
Rowan Company has a net profit margin of 8.3 percent, debt ratio of 50 percent, total assets of $5,087,200, sales of $6,738,600, and a dividend payout ratio of 65 percent. The firm’s management desires a sustainable growth rate (SGR) of 12 percent bu..
Suppose that UK Motors Ltd. is considering an investment of £30 million to develop a new factory. Assume that the company’s stockholders require a 22% rate of return, that the company’s bondholders require a 9% rate of return, that the UK corporate t..
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