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MM with Corporate Taxes Companies U and L are identical in every respect except that U is unlevered while L has $8 million of 5% bonds outstanding. Assume that: (1) All of the MM assumptions are met. (2) Both firms are subject to a 40% federal-plus-state corporate tax rate. (3) EBIT is $2 million. (4) The unlevered cost of equity is 12%. What value would MM now estimate for each firm? (Hint: Use Proposition I.) Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places. Company U $ million Company L $ million What is rs for Firm U? Round your answer to one decimal place. % What is rs for Firm L? Do not round intermediate calculations. Round your answer to one decimal place. % Find SL, and then show that SL + D = VL results in the same value as obtained in Part a. Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to two decimal places. SL = $ million SL + D = $ million What is the WACC for Firm U? Do not round intermediate calculations. Round your answer to two decimal places. % What is the WACC for Firm L? Do not round intermediate calculations. Round your answer to two decimal places. %
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Present value for various discounting periods. Find the present value of $700 due in the future under each of these conditions: What interest rate are you being charged?
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calculate the inflation-adjusted principal at the beginning of the second six months.
The approximate before-tax cost of debt for a 10-year, 8 percent, $1,000 par value bond selling at $1,150 is ______
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Assume that you have only two assets from which to choose: one-year zero coupon bonds; and junk bonds with a duration of 9.0 years. If you have a liability portfolio with duration = 5.125 years has a present value of $3 million, what percentage of yo..
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Create a spreadsheet that you can use to estimate equivalent cash flows for an arbitrary sequence of cash flows over 50 periods.
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