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Suppose the corporate tax rate is 40 %40%. Consider a firm that earns $ 2 comma 500$2,500 before interest and taxes each year with no risk. The? firm's capital expenditures equal its depreciation expenses each? year, and it will have no changes to its net working capital. The? risk-free interest rate is 5 %5%.
a. Suppose the firm has no debt and pays out its net income as a dividend each year. What is the value of the firm's equity?
b. Suppose instead the firm makes interest payments of $ 700$700 per year. What is the value of equity?What is the value of debt?
c. What is the difference between the total value of the firm with leverage and without leverage?
d. The difference in ?(c?) is equal to what percentage of the value of the debt?
If D0 = $5 and rs = 17%, what is the value of Maxwell Mining's stock?
The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory.
Russell Container Corporation has $1,000 par value bond outstanding with 30 years to maturity. Compute the yield to maturity on the old issue.
A bond with 20 detachable warrants has just been offered for sale at $1,000. The bond matures in 25 years and has an annual coupon of $48. Each warrant gives the owner the right to purchase two shares of stock in the company at $45 per share. Ordinar..
You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield.
What is the annualized forward premium or discount of the euro?
A stock has an annual return of 12 percent and a standard deviation of 31 percent. What is the smallest expected loss over the next year with a probability of 5 percent?
Which of the following events normally should not trigger a review of your will? The market for newly issued securities and initial public offerings (IPOs) is.
What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 2.1?
Make a table comparing the bond prices when market interest rates vary from 5%, 6%, …..17%, and discuss the price sensitivity of both bonds.
What would be the company’s current indicated dividend? What is the company’s expected growth in dividends?
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. What is the required return on franc flows?
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