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Rolston Corp. is comparing two different capital structures: an all-equity plan (plan I) and a levered plan (plan II). Under plan I, Rolston would have 265,000 shares of stock outstanding. Under plan II, there would be 185,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.
a. What is the value of the firm under Plan I?
b. Will the price per share of equity be different under Plan II? Show calculations.
1) What is finance in organizations? What exposure or experience should one have to excel in finance?
For a recent 10-year period, a mutual fund company reported performance (average annual return) for two of its funds as follows:
Explain the significance of correlation coefficient in efficient diversification. No need to draw a graph.
Why would a company use simultaneously a dividend and a repurchase as ways to distribute cash to shareholders?
what would the annual percentage yeild for a savings account that earned 56 in interest on 800 over the past 365
a. What is the maximum supportable annual debt service? b. What size loan does this imply?
The spot price on the S&P 500 is $20,000 and the 1-year future price is $20,609.09. The 1-year risk-free rate is 3% with continuous compounding.
Calculate the two projects NPV's, assuming a cost of 12%. Round your answers to the nearest cent.
A stock is expected to earn 43 percent in a boom economy and 21 percent in a normal economy. There is a 49 percent chance the economy will boom and a 51.0 percent chance the economy will be normal. What is the standard deviation of these returns?
What is the effect of inflation on the economy as well as our personal finance? Who gains and losses when we have high inflation or hyperinflation?
A firm has sales of $15838749, total assets of $10008826, and total debt of $6651814. If the profit margin is 6%, what is net income?
Saber Corp. is 35% debt financed. Before it took on any debt, Saber had a beta of 1.15. The beta of Saber debt is 0.16. What is the beta of Saber equity?
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