Reference no: EM133003833
-A firm has an EBIT of $760,000 per year that is expected to continue in perpetuity. The unlevered cost of equity of the firm is 12 percent and the corporate tax rate is 21 percent. The company also has 10,000 shares of perpetual bonds outstanding that have a par value of $1,000 and are selling for 99.6% of par. What is the value of the company?
-A mature firm has just paid a dividend of $9.10, the same dividend it has paid for many years. Over the next five years, the firm will be able to continue paying this constant dividend. Afterwards, management expects to reduce the dividend by 3 percent per year, indefinitely. If the required rate of return is 11 percent, what is the stock price today?
-A company is planning to issue perpetual, callable bonds with a coupon rate of 7% paid annually, and a par value of $1,000. The nominal interest rate on these bonds will be 9% for the next year. In one year, the nominal rate on the bonds will be either 10% with probability 0.6, or 8% with probability 0.4. The bonds are callable at $1300. Assuming the bonds are called if the interest rate decreases, what is the price of the callable bond today?
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What is the value of the company
: -A firm has an EBIT of $760,000 per year that is expected to continue in perpetuity. The unlevered cost of equity of the firm is 12 percent and the corporate ta
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