Reference no: EM131343684
Steinberg Corporation and Dietrich Corporation are identical companies except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 90 percent for the next year, and the probability of a recession is 10 percent. If the expansion continues, each company will generate earnings before interest and taxes (EBIT) of $4.5 million. If a recession occurs, each company will generate earnings before interest and taxes (EBIT) of $1.9 million. Steinberg's debt obligation requires the company to pay $990,000 at the end of the year. Dietrich's debt obligation requires the company to pay $2 million at the end of the year. Neither company pays taxes. Assume a discount rate of 14 percent.
a-1. What is the value today of Steinberg's debt and equity? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
Steinberg's Equity value $
Debt value $
a-2. What is the value today of Dietrich's debt and equity? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
Dietrich's Equity value $
Debt value $
b. Steinberg’s CEO recently stated that Steinberg’s value should be higher than Dietrich’s because the company has less debt and therefore less bankruptcy risk. Do you agree or disagree with this statement?
Disagree or Agree
|
Is the intruder liable for what he has done why or why not
: Is the intruder liable for what he has done? Why or why not? Do you have legal responsibilities to Sharon and Darryl? Why or why not?
|
|
How many pounds of fruit thereare for each type
: Write a Python program that prompts the user to enter types of fruit, and how many pounds of fruit thereare for each type. The program should then display the information in the form fruit , weight listed in alphabeticalorder, one fruit type per l..
|
|
What is communication
: What is communication? The book definition and my definition about the communication.Communication theory. Choose one communication theory and explain what it is.Discuss the same theory that you chose... Theory that well allow to your life. We learn..
|
|
Resolution on the resulting chromatogram
: Analyzed individually, two solutes have retention times of 17 s and 21 s with peak widths at half-maximum (w1/2) of 1.9 s and 2.8 s, respectively. If the two solutes are analyzed together, what would be the resolution on the resulting chromatogram..
|
|
What is the value today of debt and equity
: Steinberg Corporation and Dietrich Corporation are identical companies except that Dietrich is more levered. Both companies will remain in business for one more year. What is the value today of Steinberg's debt and equity? What is the value today of ..
|
|
How does the decision in this case impact the validity
: Write a paper of 700- to 1,050-words in which you answer the following: How does the decision in this case impact the validity of the Board and other provisions of the Sarbanes-Oxley Act?
|
|
What kinds of political cultures do your nation-states have
: What kinds of political cultures do your nation-states have? Briefly explain the reasons behind these facts. Are the citizens participants, subjects or parochials? Do they adhere to any particular ideology more than another?what political values w..
|
|
What is the molarity of the koh solution
: 1. A buffer system contains 0.18 MNH4+ and 0.14 M NH3. pKa of NH4+ is 9.25. How many moles of NaOH must be added to 1.00 L of this solution to increase the pH to 9.25? 2. Titration of a 15.0 mL solution of KOH requires 17.0 mL of 0.0250 M H2SO4 ..
|
|
Share price-all equity plan and levered plan
: Franklin 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 185,000 shares of stock outstanding. What is the value of the firm under each of the tw..
|