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Rise Against Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 165,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.43 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes.
Use M&M Proposition I to find the price per share. (Round your answer to 2 decimal places. (e.g., 32.16))
Share price $ per share
What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. (e.g., 32))
All equity plan $
Levered plan $
Calculate the yearly interest income of each bond on the basis of its coupn rate and the number of bonds that Mark could buy with his $20,000.
McFann Co. has two divisions, L and H. Division L is the company's low-risk division and would have a WACC of 8% if it were operated as an independent company. On what grounds do you base your accept-reject decision? Division H's project should be ac..
Woidtke Manufacturing's stock currently sells for $24 a share. The stock just paid a dividend of $3.50 a share (i.e., D0 = $3.50), and the dividend is expected to grow forever at a constant rate of 10% a year. What stock price is expected 1 year from..
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A financial institution is permitted to use leverage up to a maximum debt to equity ratio of 20. Currently the bank finances its $ 100 of assets with $10 of equity. In the 10-K filed by Bear Stearns and Company for the fiscal year ending November 30,..
Consider how the economy may be influencing your life. What has the most impact on you? Has a similar economic condition happened in the past? What is the likelihood it could happen again? What should you do to prepare for the next period of economic..
Belk Department Store charges a daily rate of 0.01 percent on its store credit cards. What interest rate is the company required by law to report to potential customers?
Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in credit terms, their products and services are virtually identical. Calculate the approximate cost of giving up the cash discou..
Johanson VI Advisors. Issued $1000 par value bonds a few years ago with a coupon rate of 7 percent, paid semiannually. After the bonds were issued, interest’s rates fell. Now with three years remaining before they mature, the bonds sell for $1,055.08..
How is the internal rate of return of a project calculated, and what must be considered when using the internal rate of return rule? How should the cash flows of a proposed new project be calculated?
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