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Question 1: Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to $1.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year?
Assuming semiannual compounding, the market price of the bond is closest to, a zero coupon bond with face value $100, matures in 25 years
You have the following data on The Home Depot, Inc. Market value of long-term debt: $20,888 million Market value of common stock: $171,138 million Beta: 1.1 Yield to maturity on debt with 10 years to maturity: 2.36% You also have the following market..
Treasury shares 5,000 were acquired at P160 . Prepare the journal entries related to the independent assumptions that the treasury shares were reissued for
Elton, Inc., which owes Boston Co. $900,000 in notes payable, is in financial difficulty. To eliminate the debt, Boston agrees to accept from Elton land having a fair market value of $680,000 and a recorded cost of $510,000. Compute the amount of gai..
The value of the firm is equal to the discounted value of the firm's free cash flows. Is it possible to forecast distant free cash flows? If not, what is the alternative?
The Cunningham Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. If the actual direct labors for the period are 175,000 how much overhead would be allocated to t..
Which changes can be expected if a credit policy is tightened? The current risk-free rate is 7,1%, while the current return on the market is 13,2%.
To lower the value of its stock, Ostrich distributes $4 million cash to Daisy (sufficient E & P exists to cover the distribution). At a later date, Daisy sells Ostrich for $26 million. Illustrate what are the tax consequences to Daisy on the sale?
Create the September 15 journal entry settling the option for cash, and assuming Shamrock accepted instead the shares in Dillon.
Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $4 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Determine whether Product F should be sold or proces..
What might be the reason(s) for Arcadia to eliminate this tax? Investors from countries with a double-taxation agreement with Arcadia had to wait for two years.
Prepare a cash budget for January and February. Prepare schedules for expected collections from customers and expected payments for direct materials a. purchases for January and February.
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